Case 12-1; Litchfield Corporation

Case 12-1; Litchfield Corporation

Project description
Please read through the following case study from the course text. Then complete the assignment outlined at the close of the study.
Case Study 12-1: Litchfield Corporation is a U.S.-based manufacturer of fashion accessories that produces umbrellas in its plant in Roanoke, Virginia, and sells

directly to retailers in the United States. As chief financial officer, you are responsible for all of the companys finance, accounting, and tax-related issues.
Sarah Litchfield, chief executive officer and majority shareholder, has informed you of her plan to begin exporting to the United Kingdom, where she believes there is

a substantial market for Litchfield umbrellas. Rather than selling directly to British umbrella retailers, she plans to establish a wholly owned UK sales subsidiary

that would purchase umbrellas from its U.S. parent and then distribute them in the United Kingdom. Yesterday, you received the following memo from Sarah Litchfield:
Memorandum
SUBJECT: Export Sales Prices
It has come to my attention that the corporate income tax rate in Great Britain is only 28 percent, as compared to the 35 percent rate we pay here in the United

States. Since our average production cost is $15.00 per unit and the price we expect to sell to UK retailers is $25.00 per unit, why dont we plan to sell to our UK

subsidiary at $15.00 per unit? That way we make no profit here in the United States and $10.00 of profit in the United Kingdom, where we pay a lower tax rate. We have

plans to invest in a factory in Scotland in the next few years anyway, so we can keep the profit we earn over there for that purpose. What do you think?
Draft a 1-2 page essay responding to Sarah Litchfields question by explaining U.S. income tax regulations related to the export sales described in her memo. Include a

discussion of any significant risks associated with her proposal. Make a recommendation with respect to how the price for these sales might be determined. Ensure your

essay is well-written and formatted APA style.
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Added on 02.12.2014 16:53
sorry I made a mistake I need 5 sources

Please read through the following case study from the course text.  Then complete the assignment outlined at the close of the study.
Case Study 12-1: Litchfield Corporation is a U.S.-based manufacturer of fashion accessories that produces umbrellas in its plant in Roanoke, Virginia, and sells

directly to retailers in the United States. As chief financial officer, you are responsible for all of the company’s finance, accounting, and tax-related issues.
Sarah Litchfield, chief executive officer and majority shareholder, has informed you of her plan to begin exporting to the United Kingdom, where she believes there is

a substantial market for Litchfield umbrellas. Rather than selling directly to British umbrella retailers, she plans to establish a wholly owned UK sales subsidiary

that would purchase umbrellas from its U.S. parent and then distribute them in the United Kingdom. Yesterday, you received the following memo from Sarah Litchfield:
Memorandum
SUBJECT: Export Sales Prices
It has come to my attention that the corporate income tax rate in Great Britain is only 28 percent, as compared to the 35 percent rate we pay here in the United

States. Since our average production cost is $15.00 per unit and the  price we expect to sell to UK retailers is $25.00 per unit, why don’t we plan to sell to our UK

subsidiary at $15.00  per unit? That way we make no profit here in the United States and $10.00 of profit in the United Kingdom, where  we pay a lower tax rate. We

have plans to invest in a factory in Scotland in the next few years anyway, so we can keep the profit we earn over there for that purpose. What do you think?
Draft a 1-2 page essay responding to Sarah Litchfield’s question by explaining U.S. income tax regulations related to the export sales described in her memo. Include a

discussion of any significant risks associated with her proposal. Make a recommendation with respect to how the price for these sales might be determined.  Ensure your

essay is well-written and formatted APA style.

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