14Which of the following is true for the FDI journey of Honda, a Japanese Automobile Company, in theUSA?out ofSelect one:O a All of themO b.in 1980s, Honda built an assembly piant in Ohio / uSA, and began to produce cars for the NorthAmerican market.O G. The cors Honda produced in the USA were substitutes for imports from Jopon,O a As the production capacity at the Ohio / uSA plant expanded, Honda began to export its u.S.-manufactured cars to other markets, including its home morket. Japan.

Foreign direct investment (FDI) is a sort of cross-border investment in which a foreign investor…

Answered: Which of the following is true for the…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter13: Lean Manufacturing And Activity Analysis

Section: Chapter Questions

Problem 2E

See similar textbooks

Similar questions

DD Limited, South Africa, is a specialist manufacturer of electronic scooters. In seeking to expand its operations, it could acquire a French subsidiary company, AAA Limited, or set up a new division in its home market. The relevant figures for these two options are:Set up new division at home R andCost of setting up premises 2 2 440 000Cost of machinery 8 7 00 000Annual sales 33 000 000Annual variable cost 1 4 050 000Additional head office expenses 1 300 000Existing head office expenses 3 220 000Depreciation: machinery 10% on cost annually 8 7 0 000Acquisition EuroAcquire shares from existing shareholders 28 000 000Redundancy costs 5 000 000Annual Sales 39 000 000Annual variable costs 18 000 000Annual fixed costs 10 000 000Consultants fees 750 000Additional information:- The project is expected to last for 7 years.- DD Limited, current cost of capital is 10%.- The French inflation is expected to be below the South African inflation by 1% per year, throughout the life of…
46 FDI often involves the establishment of new production tacilities in foreign countries such as Honda's Ohio plant. put of Select one: O True O False
ABC Inc. produces home appliances and sells them in the U.S. It outsources the production of the appliances to a Vietnamese manufacturer, and the imported appliances are priced in dollars. Its major competitor for appliances is located in China. Based on this information, ABC Inc. is subject to ____ exposure. A. economic B. translation C. economic and transaction D. transaction
Consider a Japanese firm that sells product Y in the local market and contemplates sales to the US. If the Japanese firm enters the American market it will compete in quantities against a US firm already in the market. The inverse demand for Y in the US is Pus = 250 - Q (all prices and costs in this problem are in ŞUS), where Q = qu + qj, is total quantity eventually sold by the two competitors. The production of Y requires operating a plant at a fixed cost F = 300, as well as 1 unit of labor and 1 unit of capital per unit of output. Currently, at both the US and Japan the cost of capital is $15/unit and that of labor $10/unit. The Japanese firm has the option to either invest directly in operating a plant in the US, or use at no extra fixed cost its already existing plant in Japan, shipping its product to the US. In that case a transportation cost of $10/unit has to be paid on top of any production cost; also, American customs require a $5/unit duty for any Y imports. a) Find the…
Contemporary Interiors (CI) manufactureshigh-quality furniture in factories in North Carolina for sale to top American retailers. In 1995, CIpurchased a lumber operation in Indonesia, and shifted from using American hardwoods to Indonesian raminin its products. The ramin proved to be a cheaper alternative, and it was widely accepted by Americanconsumers. CI management credits the early adoption of Indonesian wood for its ability to keep its NorthCarolina factories open when so many competitors closed their doors. Recently, however, consumers havebecome increasingly concerned about the sustainability of tropical woods, including ramin. CI has seensales begin to fall, and the company was even singled out by an environmental group for boycott. It appearsthat a shift to more sustainable woods before year-end will be necessary, and more costly.In response to the looming increase in material costs, CEO Geoff Armstrong calls a meeting of upper management.The group generates the following…
ORANGE PRODUCTS INC. Orange Products Inc. is a producer of juice drinks in Florida, USA. Until now, the company has confined its operations and sales to the United States, but its CEO, Ray Jalkio wants to expand into the Pacific Rim. The first step is to set up sales subsidiaries in Japan and Australia. then to set a production plant in Japan, and finally to distribute the product throughout the Pacific Rim. The firm's CFO, Janet Jackson, is enthusiastic about the plan, but she is worried about the implications of the foreign expansion on the firm's financial management process. She has asked your group to develop a tutorial package that explains the basics of multinational financial management. The tutorial will be presented at the next management committee (ManCom) meeting. Consider the following exchange rates: US Dollar Required to buy one unit of Foreign Currency Japanese Yen Australian Dollar Number of units of Foreign Currency per US Dollar 109.89 1.316 0.0091 0.760 1. Orange…
Finisterra, S.A. Finisterra, S.A., located in the state of Baja California, Mexico, manufactures frozen Mexican food which enjoys a large following in the U.S. states of California and Arizona to the north. In order to be closer to its U.S. market, Finisterra is considering moving some of its manufacturing operations to southern California. Operations in California would begin in year 1 for three years and have the following attributes: E The operations in California will pay 81% of its accounting profit to Finisterra as an annual cash dividend. Mexican taxes are calculated on grossed up dividends from foreign countries, with a credit for host-country taxes already paid. The corporate income tax rate in U.S. is 28% (the tax rate in Mexico is lower than the rate in the U.S.), the current spot exchange rate is Ps10.00/$, and the exchange rates for the next three years will be Ps11.00/S, Ps12.00/S, and Ps13.00/S, respectively. Assume the after-tax dividends received by the parent in years…
WAVERS Inc. is a California based firm that specializes in the manufacturing of high- end surfboards. Consumers in the coastal African region as well as Japan and the UK have recently discovered the joys of surfing. WAVERS has hired you as a consultant to provide advice regarding global expansion. They are debating whether to continue exporting to the UK or possibly licensing the technology to a London firm that has expressed some interest in manufacturing the product in the UK. Currently, Wavers return on investment from their domestic market is 35% with a net profit of $5 million from $20 million in sales. Labor is roughly 50% of total expenses and 20% cheaper in the UK than the US. Costs other than labor in the UK are roughly on par with the US. Discuss whether they should license or continue to export and the contingencies that need to be considered. If they license, what should the royalty rate be? Provide any assumptions that you have made
Dianthus Ltd is a multinational company with headquarters in Queensland, Australia. It is, however, listed on both ASX (Australian Securities Exchange) and TWSE (Taiwan Stock Exchange). It manufactures and sells cardboard boxes worldwide. Most of its products are manufactured in Taiwan, where it obtains local materials and labour. Its sales are invoiced in Australian dollars. Some other information about the company is displayed below. Sales breakdown by geographical segments 2020 2019 Sales in Australia 2.1 billion AUD 2.2 billion AUD Sales in Taiwan 2.51 billion TWD 2.04 billion TWD Sales to the rest of the world 0.5 billion AUD 0.4 billion AUD Value of listings on securities / stock exchanges ASX TWSE Number of shares 1,000,000 2,000,000,000 Price per share 510 AUD 2.4 TWD The company issues all of its bonds to both retail and institutional investors in Australia, currently worth AUD 215 million in the market. In the tables above, AUD refers to Australian dollars, whereas TWD refers…
Your employer, Getting Bigger All The Time, Inc. (GBATT), a multinational corporation headquartered in the United States of America, is looking to expand operations into Brazil. GBATT manufacturers a variety of materials used in the residential and commercial building industries. The Brazilian economy has been expanding and sales of GBATT materials to Brazilian companies have greatly increased. GBATT is exploring the possibility of building a new manufacturing facility in Brazil, not only to meet the increasing Brazilian demand, but also in anticipation of increased demand in other South American and Latin American countries once the global recession is completely over. The following is a basic balance sheet, income statement and cash flow statements as of the last two year ends and for the last two years of operations. (file attached) QUESTION Analyze GBATT’s operational performance by describing its year over year performance.
Paterson Company, a U.S.-based company, manufactures and sells electronic components worldwide. Virtually all its manufacturing takes place in the United States. The company has marketing divisions throughout Europe, including France. Debbie Kishimoto, manager of this division, was hired from a competitor 3 years ago. Debbie, recently informed of a price increase in one of the major product lines, requested a meeting with Jeff Phillips, marketing vice president. Their conversation follows. Debbie: Jeff, I simply dont understand why the price of our main product has increased from 5.00 to 5.50 per unit. We negotiated an agreement earlier in the year with our manufacturing division in Philadelphia for a price of 5.00 for the entire year. I called the manager of that division. He said that the original price was still acceptablethat the increase was a directive from headquarters. Thats why I wanted to meet with you. I need some explanations. When I was hired, I was told that pricing decisions were made by the divisions. This directive interferes with this decentralized philosophy and will lower my divisions profits. Given current market conditions, there is no way we can pass on the cost increase. Profits for my division will drop at least 600,000 if this price is maintained. I think a midyear increase of this magnitude is unfair to my division. Jeff: Under normal operating conditions, headquarters would not interfere with divisional decisions. But as a company, we are having some problems. What you just told me is exactly why the price of your product has been increased. We want the profits of all our European marketing divisions to drop. Debbie: What do you mean that you want the profits to drop? That doesnt make any sense. Arent we in business to make money? Jeff: Debbie, what you lack is corporate perspective. We are in business to make money, and thats why we want European profits to decrease. Our U.S. divisions are not doing well this year. Projections show significant losses. At the same time, projections for European operations show good profitability. By increasing the cost of key products transferred to Europeto your division, for examplewe increase revenues and profits in the United States. By decreasing your profits, we avoid paying taxes in France. With losses on other U.S. operations to offset the corresponding increase in domestic profits, we avoid paying taxes in the United States as well. The net effect is a much-needed increase in our cash flow. Besides, you know how hard it is in some of these European countries to transfer out capital. This is a clean way of doing it. Debbie: Im not so sure that its clean. I cant imagine the tax laws permitting this type of scheme. There is another problem, too. You know that the companys bonus plans are tied to a divisions profits. This plan could cost all of the European managers a lot of money. Jeff: Debbie, you have no reason to worry about the effect on your bonusor on our evaluation of your performance. Corporate management has already taken steps to ensure no loss of compensation. The plan is to compute what income would have been if the old price had prevailed and base bonuses on that figure. Ill meet with the other divisional managers and explain the situation to them as well. Debbie: The bonus adjustment seems fair, although I wonder if the reasons for the drop in profits will be remembered in a couple of years when Im being considered for promotion. Anyway, I still have some strong ethical concerns about this. How does this scheme relate to the tax laws? Jeff: We will be in technical compliance with the tax laws. In the United States, Section 482 of the Internal Revenue Code governs this type of transaction. The key to this law, as well as most European laws, is evidence of an arms-length price. Since youre a distributor, we can use the resale price method to determine such a price. Essentially, the arms-length price for the transferred good is backed into by starting with the price at which you sell the product and then adjusting that price for the markup and other legitimate differences, such as tariffs and transportation. Debbie: If I were a French tax auditor, I would wonder why the markup dropped from last year to this year. Are we being good citizens and meeting the fiscal responsibilities imposed on us by each country in which we operate? Jeff: Well, a French tax auditor might wonder about the drop in markup. But, the markup is still within reason, and we can make a good argument for increased costs. In fact, weve already instructed the managers of our manufacturing divisions to legitimately reassign as many costs as they can to the European product lines. So far, they have been very successful. I think our records will support the increase that you are receiving. You really do not need to be concerned with the tax authorities. Our tax department assures me that this has been carefully researchedits unlikely that a tax audit will create any difficulties. Itll all be legal and above board. Weve done this several times in the past with total success. Required: 1. Do you think that the tax-minimization scheme described to Debbie Kishimoto is in harmony with the ethical behavior that should be displayed by top corporate executives? Why or why not? What would you do if you were Debbie? 2. Apparently, the tax department of Paterson Company has been strongly involved in developing the tax-minimization scheme. Assume that the accountants responsible for the decision are CMAs and members of the IMA, subject to the IMA standards of ethical conduct. Review the IMA standards for ethical conduct in Chapter 1. Are any of these standards being violated by the accountants in Patersons tax department? If so, identify them. What should these tax accountants do if requested to develop a questionable taxminimization scheme?
The pre-release material is below together with some further information and the requirements of the question. Ringle Company is a very successful multi-national retail company which has been selling a large range of white goods (refrigerators, freezers, washing machines, tumble dryers) for a number of years. One year ago, it sourced a new overseas supplier of these goods who were able to provide the goods at a much lower cost due to their cheap labour rates. The overseas supplier also produces microwaves and other kitchen appliances. Ringle Company had been planning to move into the market for kitchen appliances and therefore they took the decision to commence this process by stocking these microwaves for sale to their customers. If successful, they would then consider expanding to other kitchen appliances. Ringle Co were using external hauliers for delivery of their goods and were able to offer their customers next day delivery on all their orders within the UK and a 3-day…

SEE MORE QUESTIONS

Recommended textbooks for you

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

International Financial Management

Finance

ISBN:

9780357130698

Author:

Madura

Publisher:

Cengage

Managerial Accounting

Accounting

ISBN:

9781337912020

Author:

Carl Warren, Ph.d. Cma William B. Tayler

Publisher:

South-Western College Pub

Cornerstones of Cost Management (Cornerstones Ser…

Accounting

ISBN:

9781305970663

Author:

Don R. Hansen, Maryanne M. Mowen

Publisher:

Cengage Learning

International Financial Management

Finance

ISBN:

9780357130698

Author:

Madura

Publisher:

Cengage

Managerial Accounting: The Cornerstone of Busines…

Accounting

ISBN:

9781337115773

Author:

Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:

Cengage Learning

SEE MORE TEXTBOOKS