SafeCo Manufacturing Company pays $26 to purchase materials from related supplie

Question

SafeCo Manufacturing Company pays $26 to purchase materials from related suppliers in Canada. SafeCo incurs $19.50 in labor costs at its factory in the United States to fabricate and assemble a garden tool. The company also incurs packaging, selling, and other costs of $2.60 and sells the garden tool for $83.

Round all computations to two decimal places and use in subsequent calculations. If required, round final answers to two decimal places.

a. Is the garden tool treated as manufactured by SafeCo?
Yes

b. SafeCo's DPGR is $ ........... and its QPAI is $..............

Explanation / Answer

Solution:

1) Yes

2) SafeCo's DPGR is $83 and its QPAI is $ 34.90

Working:

The garden tool will be categorised as manufactured by the SafeCO because the company's labor costs are substantial i.e they are more than 20% of the taxpayer’s total cost for the garden tool [$19.50/($26 + $19.50)= 42.86%. Consequently, SafeCo’s DPGR is $83, and the full $34.90 in profit (83 - 26 - 19.50 - 2.60 = 34.90) is QPAI

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