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Hello Sir,
Kaplan , Section A (Q6) – YILANDWE (june 15)
The parts needed to assemble into the components in Yilandwe will be sent from the USA
by Imoni Co at a cost of $200 per component unit, from which Imoni Co would currently
earn a pre-tax contribution of $40 for each component unit. However, Imoni Co feels that it
can negotiate with Yilandwe’s government and increase the transfer price to $280 per
component unit.Appendix 1
Contribution (parts sales)
($120 + inflation per unit).How is the contribution $120?
If currently that are getting a contribution of $40, then the cost must be 200 – 40 = $160.
If the increase the price to $280, then the contribution will be 280 – 160 – $120.
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