ALSU Company has manufacturing subsidiaries in Malaysia and Malta. It is considering shipping the subcomponents of Product X to one or the other of these countries for final assembly. The final product will be sold in the country where it is assembled. Other information is as follows:
| Malaysia | Malta |
Average exchange rate | $1 = 4.50 ringgits | $1 = 0.40 lira |
Import duty | 4% | 12% |
Income tax rate | 25% | 12% |
Unit selling price of Product X | 700 ringgits | 75 liri |
Price of subcomponent | 200 ringgits | 18 liri |
Final assembly costs | 250 ringgits | 30 liri |
Number of units to be sold | 14,000 units | 10,000 units |
In both countries, the import duties are based on the value of the incoming goods in the receiving country’s currency.
Instructions
a. For each country, prepare an income statement on a per-unit basis denominated in that country’s currency.
b. In which country would the highest profit per unit (in dollars) be earned?
c. In which country would the highest total profit (in dollars) be earned?
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