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Mei Co. imports car spare parts from its subsidiary in South Korea which are used in the production of car door components (DC). DC01 costs
Mei Co. imports car spare parts from its subsidiary in South Korea which are used in the production of car door components (DC). DC01 costs the South Korean company $14 to produce and $0.7 to ship to Mei Co. Mei Co. uses DC01 parts to produce car door parts that it sells to stores in China for $9.5 per unit. The applicable tax rates are as follows: South Korea Income Tax 9% China Income Tax 13% China Import duty 15% of invoice price. Required: a. Determine the total amount of taxes and duties paid to the governments of China and South Korea if DC01 is sold to Mei Co at a price of $6.50 per unit. b. Determine the total amount of taxes and duties paid to the governments of China and South Korea if DC01 is sold to Mei Co at a price of $7.20 per unit. c. Explain why the results obtained in parts (a) and (b) are different
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