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Export Pricing – Cost Plus Approach Exercise

1) Given an Ex-Works Unit price of $ 150 calculate the following four prices to quote a new client for a direct sale involving no commercial agent.

FOB -Barcelona 153.975

Carriage to Wharf/Dock/Place of Loading = 1.5% of unit cost 150*.015=2.25$ Customs Clearance = 0.15% Unit Cost. 150* .0015= 0.225$ Additional Packaging / Labour for transport 1% of unit cost. 150* .01 = 1.5$

(150+2.25+.225+1.5)=153.97

CPT -Bangkok Airport 190.6 Air freight = (3x((60x80x80)/6000)) = 192kg x 5 = 960USD/kg /30U = 32 Air documents 1% of FOB unit price= 1.54 Transport/Fuel contingency 2% of FOB unit Price = 3.08

(153.97+32+1.54+3.08)= 190.59

CIF -Port of Bangkok 165.6 Maritime Freight cost = ((3x((60x80x80)/3000))= 1152kg x 165 = 190.08USD/Ton /30= 6.34 Maritime Document Fees = 1% of FOB unit Price = 1.54 Marine Insure Insurance Premium = 0.5% of FOB unit price = .77 Transport/Fuel contingency 2% of FOB unit Price = 3.08

(153.97+6.34+1.54+0.77+3.08)= 165.6

DDP -Customer’s store in Bangkok 193.7 (10)

* Import Duty of 15% = 24.84 * Customs Clearance Charge of 0.5% per unit = 0.83 * Delivery Charge of $ 1.5 per unit. =2.48

(165.9+24.84+0.83+2.48)=193.7

2) Comment on the incidence of transport in each case and give examples for the potential validity of each quote.

We can conclude that the best solution is the maritime because we cannot afford the air’s incidence of transport.

Comment on the advantages and disadvantages to the exporter of each quote. (5)

* The advantage of the maritime is that we have a lower incidence of transport than the air one so it’s really cheap. * The disadvantage is that by maritime

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