Question

4) TURRONITIS S.A.

It is a Valencia-based company that produces delicious hazelnuts and

chocolate candies. The company decided to sell 200,000 boxes of candy products in Mexico.

To this end, the administrator signed an agreement with 5 import companies that involves a profit margin of 15 % over the price charged to retailers. The agreement fixes FOB prices (in Valencia) in Euro.

In addition, we know:

Freight and insurance Valencia-Veracruz: € 1,202.02

Import duties: 9% over CIF value (Veracruz)

Land transport and delivery costs (approx.): $ 10

Downloading costs (Veracruz): $ 5. (The price of the freight Valencia-Veracruz does not include these costs)

Retailer margin: 25% over consumer price

Exchange rate: € 1= $1.4975

What should be the FOB price (Valencia) in Euro that must be charged in order to allow for a consumer price of $2 –a-piece in Mexico?

Answer 1

	Particulars		Pieces	Per Piece	Total Price
	Price to Consumer	(A)	200000	$      2.00	$       4,00,000
Less:	Retailer Margin	(B)	200000	$      0.50	$       1,00,000
	(25% of $2 Per piece )
	Price charged to Retailer	(A-B)	200000	$      1.50	$       3,00,000
Less :	Profit Margin	©	200000	$      0.23	$          45,000
	(15% of $1.5 per piece)
	Total Cost	(A-B-C)	200000	$      1.28	$       2,55,000
Less	Downloading Cost				$              5.00
Less	Land Transport and delivery cost				$            10.00
	Cost after above two cost	I			$ 2,54,985.00
Less	Import Duty	II			$    21,053.81
	($233931.19 *9/100)
	CIF	(I-II)			$ 2,33,931.19
	($254985 *100/109)
Less	Freight and Insurance	III			$       1,800.02
	(1202.02 * $ 1.4975)
	FOB in Dollar	(I-II-III)			$ 2,32,131.17
	FOB Price in Euro				€       1,55,012
	( $232121.17 /$1.4975)
	FOB Price in Euro Per Piece				€          0.7751
	(155012/200000)