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The Nature and Wildlife Corporation has manufacturing facilities in country A and an assembly plant in...

The Nature and Wildlife Corporation has manufacturing facilities in country A and an assembly plant in country B. In June 2017, the company will ship 1,000 units with a production cost of $65 per unit to its plant in country B. Its operating expenses in country A are $15,000 for the month. The income tax rate in country A is 20% and in country B it is 40%. The company plans to have a transfer price of $100 per unit. The final product can be sold in country B for $140. Country B’s operating expenses are $10,000 during the month. How much will the combined profits of the two operations be in April 2018?

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Answer #1
STATEMENT SHOWING THE COMBINED PROFITS
COUNTRY A COUNTRY B TOTAL
Sales revenue
A (1000 units @2$ 100) 100000
B (1000 units @$140) 140000 240000
Less: Cost of Goods sold
A (1000 units @$ 65) 65000
B (1000 units @2$100) 100000 165000
Gross Margin 35000 40000 75000
Less: Operating expense 15000 10000 25000
Net Income before tax 20000 30000 50000
Less: Tax
A ($20000*20%) 4000
B (30000*40%) 12000 16000
Net income after tax 16000 18000 34000
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