Firm Q and Firm R conduct business in a foreign country that imposes a 3 percent VAT.

Question:

Firm Q and Firm R conduct business in a foreign country that imposes a 3 percent VAT. Firm Q produces entertainment videos at a $6 cost per unit and sells the videos to Firm R for $9 per unit. Firm R sells the videos at retail for $10 per unit. This year, the combined efforts of Firm Q and Firm R resulted in sales of 1 2.4 million videos to the public. Compute the VAT for each firm.