A European car company is trying to decide if they should manufacture their vehi
ID: 354412 • Letter: A
Question
A European car company is trying to decide if they should manufacture their vehicles for the US market in Europe, or in the United States. Please do the calculations that will help this company come to a decision Sale price of vehicle in the United States - $36,000 Cost to manufacture the car in Europe 20,000 Euros Cost to import the vehicle into the United States - $4,500 Cost to manufacture the vehicles in the United States - $28,500 10. (3 POINTS) Suppose the exchange rate is near 1 Euro = $1.30. What would be the profit for the European car company (in Euros) if they manufactured their car in Europe? Remember, they have to pay the import tax.Explanation / Answer
Cost to manufacture car in Europe = Euro 20,000
Therefore cost to manufacture car in Europe ( in US Dollars ) = $ 1.3/ Euro x 20000 Euro = $26,000
Cost to import the car in USA = $4500
Therefore , landed cost of car made in Europe in to USA = $26,000 + $4500 = $30,500
Sale price = $36,000 per car
Therefore ,
Profit for the European car company if they manufactured their car in Europe = $36,000 - $30,500 = $5,500
Profit for the European car company if they manufactured their car in United States = $36,000 - $28,500 = $7500
PROFIT FOR THE EUROPEAN CAR COMPANY IF THE MANUFACTURED THEIR CAR IN EUROPE = $5,500
PROFIT FOR THE EUROPEN CAR COMPANY IF THEY MANUFACTURED THEIR CAR IN UNITED STATES = $7500
PROFIT FOR THE EUROPEAN CAR COMPANY IF THE MANUFACTURED THEIR CAR IN EUROPE = $5,500
PROFIT FOR THE EUROPEN CAR COMPANY IF THEY MANUFACTURED THEIR CAR IN UNITED STATES = $7500
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