Megabyte Inc. of France and R Ltd. of India are associated enterprises. R Ltd. imports 3,000 compressors for Air Conditioners from Megabyte Inc. at 7,500 per unit and these are sold to Pleasure Cooling Solutions Ltd at a price of 11,000 per unit. R Ltd. had also imported similar products from Cold Inc. Poland and sold outside at a Gross Profit of 20% on Sales. Megabyte Inc. offered a quantity discount of * 1,500 per unit. Cold Inc. could offer only 500 per unit as Quantity Discount. The freight and customs duty paid for imports from Cold Inc. Poland had cost R Ltd. 1,200 per piece. In respect of purchase from Cold Inc., R Ltd. had to pay 200 only as freight charges. Determine the Arm's Length Price and the amount of increase in Total Income of R Ltd.
Megabyte Inc. of France and R Ltd. of India are associated enterprises. R Ltd. imports 3,000 compressors for Air Conditioners from Megabyte Inc. at 7,500 per unit and these are sold to Pleasure Cooling Solutions Ltd at a price of 11,000 per unit. R Ltd. had also imported similar products from Cold Inc. Poland and sold outside at a Gross Profit of 20% on Sales. Megabyte Inc. offered a quantity discount of * 1,500 per unit. Cold Inc. could offer only 500 per unit as Quantity Discount. The freight and customs duty paid for imports from Cold Inc. Poland had cost R Ltd. 1,200 per piece. In respect of purchase from Cold Inc., R Ltd. had to pay 200 only as freight charges. Determine the Arm's Length Price and the amount of increase in Total Income of R Ltd.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter10: Decentralization: Responsibility Accounting, Performance Evaluation, And Transfer Pricing
Section: Chapter Questions
Problem 14E
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Question
![QUESTION-5
Megabyte Inc. of France and R Ltd. of India are associated enterprises. R Ltd. imports 3,000
compressors for Air Conditioners from Megabyte Inc. at 7,500 per unit and these are sold to
Pleasure Cooling Solutions Ltd at a price of 11,000 per unit. R Ltd. had also imported similar
products from Cold Inc. Poland and sold outside at a Gross Profit of 20% on Sales. Megabyte
Inc. offered a quantity discount of 1,500 per unit. Cold Inc. could offer only 500 per unit
as Quantity Discount. The freight and customs duty paid for imports from Cold Inc. Poland had
cost R Ltd. 1,200 per piece. In respect of purchase from Cold Inc., R Ltd. had to pay ₹ 200
only as freight charges. Determine the Arm's Length Price and the amount of increase in Total
Income of R Ltd.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F131b19c1-a8b6-4519-a455-ff27060cdb45%2Fcd21e219-f324-44a9-b9f8-1716ccc8f00a%2Fchnvs8x_processed.jpeg&w=3840&q=75)
Transcribed Image Text:QUESTION-5
Megabyte Inc. of France and R Ltd. of India are associated enterprises. R Ltd. imports 3,000
compressors for Air Conditioners from Megabyte Inc. at 7,500 per unit and these are sold to
Pleasure Cooling Solutions Ltd at a price of 11,000 per unit. R Ltd. had also imported similar
products from Cold Inc. Poland and sold outside at a Gross Profit of 20% on Sales. Megabyte
Inc. offered a quantity discount of 1,500 per unit. Cold Inc. could offer only 500 per unit
as Quantity Discount. The freight and customs duty paid for imports from Cold Inc. Poland had
cost R Ltd. 1,200 per piece. In respect of purchase from Cold Inc., R Ltd. had to pay ₹ 200
only as freight charges. Determine the Arm's Length Price and the amount of increase in Total
Income of R Ltd.
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