DPAD_conversion_costs_solution - The foreign...

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Solution: Swallow Corporation sells portable air filtration systems by means of the Internet and direct mail orders. Most of the components are purchased from foreign suppliers at a cost of $800. Swallow supplies the remaining components and assembles the final product at a cost of $210. Swallows marketing, packaging, and shipping expenses total $20 per unit. Each unit is sold for $1,400. Required : 1. What is Swallow’s DPGR per unit? The full $1,400 selling price represents DPGR.
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Unformatted text preview: The foreign components ($800) can be included as the domestic conversion costs ($210) represents at least 20% ($210/$1,010) of CGS and meets the safe harbor rule. 2. What is Swallow’s QPAI per unit? QPAI is $370 ($1,400 – $800 – $210 – $20). 3. Assume that Swallow incurred only $170 in production costs. What is Swallow’s DPGR per unit? What is Swallow’s QPAI per unit? As 17.5% ($170/$970) is less than 20%, the safe harbor test is not met. Therefore, DPGR and QPAI are both zero and there is no DPAD....
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