Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Could you please calculate net profit after tax when the transfer price is based on total cost plus mark-up of 20 % assuming all units

Could you please calculate net profit after tax when the transfer price is based on total cost plus mark-up of 20 % assuming all units produced are purchased solely by Australian Electronics?

image text in transcribed
Life Good Electronics Company, an Australian firm, operates a subsidiary in Singapore (Singapore Electronics) which produces guitars. The following information has been provided to you: 1. The production cost of $120 per unit based on operations at full capacity of 10 000 units. Singapore Electronics sells the guitars to two customers in Australia- Australian Electronics (a fully owned subsidiary of Life Good Electronics Company) and Target Australia (an independent customer). 2. Operating expenses are $15 per unit in Australia and $10 in Singapore. 3. The cost to transport the guitars to Australia is $15 per unit and is paid by Singapore Electronics. 4. Other Singaporean manufacturers of guitars sell them to customers in Australia at a mark-up on total cost of 20 percent. 5. Target and Australian Electronics pays applicable Australian import duties on its purchases from Singapore Electronics. 6. Target places a reasonable mark-up on guitars and sells them at a retail price of $324 per unit. Australian Electronics sells the guitars at a retail price of $333 per unit. 7. In Australia import duty is 20%. Import duties are deductible for tax purposes. 8. In Australia income tax rate is 35% and in Singapore income tax rate is 15%

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Corporate Financial Accounting

Authors: Carl S Warren, James M Reeve, Jonathan Duchac

11th Edition

0538480920, 9780538480925

More Books

Students also viewed these Accounting questions

Question

Briefly describe an activity-based accounting system.

Answered: 1 week ago