Gelo, Inc., has two manufacturing plants, one in Singapore and the other one in San Antonio.The San Antonio plant is located in a foreign trade zone.On March 1, Gelo received a large order from a Japanese customer.The order is for 10,000,000 yen to be paid on receipt of the goods, scheduled on June 1.Gelo assigned this order to the San Antonio plant; however, one necessary component for the order is to be manufactured by the Singapore plant.The component will be transferred to San Antonio on April 1, using a cost-plus transfer price of $10,000 (U.S. dollars).Typically, two percent of the Singapore parts are defective.The US tariff on the component parts is 30%.The carrying cost for Gelo is 15% per year.

The following spot rates for $1 US are as follows:

Exchange Rates of $1 for

YenSingapore Dollars

March 1107.001.60

April 1107.501.55

June 1107.601.50

Required:

1.What is the total cost of the imported parts from Singapore to the San Antonio plant in US dollars?

1.Suppose that the San Antonio plant were not located in a foreign trade zone, what would be the total cost of the imported parts from Singapore?

1.How much does Gelo expect to receive from the Japanese customer in US dollars, using the spot rate at the time of the order? at the time of payment?