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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Kamber, Inc., owns a factory located close to, but not inside, a foreign trade zone. The plant imports volatile chemicals that are used in the manufacture of chemical reagents for laboratories. Each year, Kamber imports about $14,200,000 of chemicals subject to a 30% tariff when shipped into the United States. About 15% of the imported chemicals are lost through evaporation during the manufacturing process. In addition, Kamber has a carrying cost of 10% per year associated with the duty payment. On average, the chemicals are held in inventory for 9 months.

Required:

  1. 1. How much duty is paid annually by Kamber?
  2. 2. What is the carrying cost associated with the payment of duty?

1.

To determine

Compute the amount of duty to be paid.

Explanation

Foreign Trade Zone:

Foreign trade zone are the areas declared as FTZs that are located in a home country, however these are treated like foreign areas for the purpose of levying duties and taxes.

Computation of amount of duty:

ParticularsAmount ($)
Imports14,200,000

2.

To determine

Compute carrying cost.

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