Learner Company operates a petrochemical plant located in a foreign trade zone and imports chemicals that experience substantial evaporation loss during processing for use in production.It imported $200,000 of crude oil for use in chemical production.About 25% of the oil is lost through evaporation during production.Duty is assessed at 8% of cost, and carrying cost is 10% per year. Learner sells the finished product 6 months later.What is the amount of duty paid and carrying costs incurred by Learner?

Question

Quizplus · Accepted Answer

Learner pays duty at the time of sale because it is in a foreign trade zone, and imported goods do not incur duty until (or unless) they are moved out of the zone.Since 75% (100% - 25%) of the original imported oil remains in the final product, duty equals $12,000 (0.75 × $200,000 × 0.08).There are no carrying costs associated with the duty.

Learner Company Operates a Petrochemical Plant Located in a Foreign