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Dear John,
I have a question related to the answer presented in Appendix 1 – in the examiner answer , after Remittable flows converted in dollars , why and how is calculated Contribution (parts sales) ?
It seems to me that is calculated twice , as it also appears in the first part of the answer when Sales revenue , Parts cost, Variable costs are calculated before conversion to dollars.
Thank you very much for your time and answer ,
Cori
The parts needed to assemble into components are sent to Yilandwe from Imoni in the USA, and Yilandwe has to pay Imoni for them.
They are a cost to Yilandwe (and therefore reduces the tax paid in Yilandwe and the remittances). Yilandwe is paying $280 per component.
The contribution earned by Imoni is income to Imoni in the USA (and therefore increases the US tax payable). The contribution earned was $40 per component, but because they are increasing the price by $80 the contribution will actually be $120 per component.
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