Ulsa company has manufacturing subsidiaries in malasia and malta. It is consi

ID: 2366806 • Letter: #

Question

Ulsa company has manufacturing subsidiaries in malasia and malta. It is considering shipping the subcomponents of Product Y to one or the other of these conties for final assembly. The final product will be sold in the country where it is assembled. Other information is as followed.
                                                Malaysia                               Malta                 
Average exchange rate               $1=4.3 ringgits                      $1=0.40 lira
import duty                                 5%                                       15%
Income tax rate                           20%                                      10%
Unit selling price of Product Y      645 ringgits                            70 lira
Price of subcomponent                215 ringgits                            20 lira
Final assembly costs                     200 ringgits                           25 lira
Number of units to be sold           12,000 units                           8,000 units
 
In both countries the import duties are based ont he value of the incoming goods in the receiving countries currency.
 
a. For each country, prepare and income statement on a per-unit based denomination in that country's currency.

Explanation / Answer

a. Preparation of income statement on a per-unit based: Malaysia Malta Sales revenue per unit 645.00 Ringgits 70.00 Lira Cost of components (215.00) (20.00) Import duties (.05 × 215; .15 × 20) (10.75) (3.00) Assembly costs (200.00) (25.00) Pretax profit per unit 219.25 22.00 Income tax per unit (20%; 10%) (43.85) (2.20) Profit per unit 175.40 Ringgits 19.80 Lira Malaysia Malta Sales revenue per unit 645.00 Ringgits 70.00 Lira Cost of components (215.00) (20.00) Import duties (.05 × 215; .15 × 20) (10.75) (3.00) Assembly costs (200.00) (25.00) Pretax profit per unit 219.25 22.00 Income tax per unit (20%; 10%) (43.85) (2.20) Profit per unit 175.40 Ringgits 19.80 Lira Malaysia Malta Sales revenue per unit 645.00 Ringgits 70.00 Lira Cost of components (215.00) (20.00) Import duties (.05 × 215; .15 × 20) (10.75) (3.00) Assembly costs (200.00) (25.00) Pretax profit per unit 219.25 22.00 Income tax per unit (20%; 10%) (43.85) (2.20) Profit per unit 175.40 Ringgits 19.80 Lira

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