Question 1 ABC miners operates two divisions, one in Japan and… Question 1ABC miners operates two divisions, one in Japan and other in United Kingdom (U.K.). MiningDivision is operated in Japan which is rich in raw emerald.The other division is United Kingdom Processing Division. It processes the raw emeraldinto polished stone fit for human wearing.The cost details of these divisions are as follows:Division Japan Mining Division United Kingdom Processing DivisionPer carat of raw emerald Per carat of polished emeraldVariable Cost 2,500 Yen 150 PoundFixed Cost 5,000 Yen 350 PoundSeveral polishing companies in Japan buy raw emerald from other local Mining Companiesat 9,000 Yen per carat. Current Foreign Exchange Rate is 50 yen = 1 Pound. Income Tax ratesare 20% and 30% in Japan and the United Kingdom respectively.It takes 2 carats of Raw Yellow emerald to yield 1 carat of Polished Stone. Polished emeraldsell for 3,000 Pounds per carat.Required(i) COMPUTE the transfer price for 1 carat of raw emerald transferred from MiningDivision to the Processing Division under two methods – (a) 200% of Full Costs and(b) Market Price.(ii) 1,000 carats of raw emerald are mined by the Japan Mining Division and then processedand sold by the U.K. Processing Division. COMPUTE the after tax operating income foreach division under both the Transfer Pricing Methods stated above in (i). Question 2Standard Corporation Inc. (SCI) is a US based multinational company engaged inmanufacturing and marketing of Printers and Scanners. It has subsidiaries spreading acrossthe world which either manufactures or sales Printers and Scanners using the brand name ofSCI.The Indian subsidiary of the SCI buys an important component for the Printers and Scannersfrom the Chinese subsidiary of the same MNC group. The Indian subsidiary buys 1,50,000units of components per annum from the Chinese subsidiary at CNY (? 30 per unit andpays a total custom duty of 29.5% of value of the components purchased.A Japanese MNC which manufactures the same component which is used in the Printer andScanners of SCI, has a manufacturing unit in India and is ready to supply the same componentto the Indian subsidiary of SCI at ?320 per unit.The SCI is examining the proposal of the Japanese manufacturer and asked its Chinessubsidiary to presents its views on this issue. The Chinese subsidiary of the SCI has informedthat it will be able to sell 1,20,000 units of the components to the local Chinese manufacturesat the same price i.e. ?30 per unit but it will incur inland taxes @ 10% on sales value.Variable cost per unit of manufacturing the component is ?20 per unit. The Fixed Costs ofthe subsidiaries will remain unchanged.The Corporation tax rates and currency exchange rates are as follows:Corporation Tax Rates Currency Exchange RatesChina 25% 1 US Dollar ($) = ? 61.50India 34% 1 US Dollar ($) = ?6.25USA 40% 1 CNY (? = ? 9.80 Required(i) PREPARE a financial appraisal for the impact of the proposal by the Japanesemanufacturer to supply components for Printers and Scanners to Indian subsidiary ofSCI. [Present your solution in Indian Currency and its equivalent.](ii) IDENTIFY other issues that would be considered by the SCI in relation to thisproposal.Inaccurately wronganswers will be considered unhelpful.AccountingBusinessFinancial AccountingGet a plagiarism-free order today we guarantee confidentiality and a professional paper and we will meet the deadline.
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