ICAEW BIP · Chapter 10 · Question 5 of 10
Calder Ltd buys a component from an overseas supplier at £40 per unit. The government introduces an import tariff of 15% of the component's value. Calder uses 12,000 components a year and cannot pass the extra cost on to customers or find another supplier. By how much will Calder's annual profit fall?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) £72,000
Explanation
Tariff per component = £40 x 15% = £6. Annual cost increase = 12,000 x £6 = £72,000, so profit falls by £72,000. £552,000 is the new total cost of the components (£480,000 x 1.15), not the change, and £62,609 wrongly treats the tariff as already included in the £480,000.
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