Elite Corp.builds a manufacturing plant in a foreign trade zone.Materials costing $2,000,000 each month are imported.Duty is assessed at 6% of cost.About 14% of the materials are defective and disposed of as waste.What is the savings to the company of locating inside a foreign trade zone?

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Quizplus · Accepted Answer

Each month, the company pays a duty of $103,200 ($2,000,000 × 0.86 × 0.06) since only (100% - 14%) 86% of the material is good and can be sold.If the company were located outside the foreign trade zone, a duty of $120,000 ($2,000,000 × 0.06) would be paid.Thus, the savings amounted to ($120,000 - $103,200) $16,800 per month.