Problem:
Home Built and Style Your Home operate two identical plants that produce modular homes. Home Built is in a foreign trade zone, and Style Your Home is not. Each company purchases $2,000,000 of insulation imported from Mexico for use in the walls of the homes they produce. Each purchases the insulation about one month before use in production, and the finished modular houses remain in inventory about two months before sale and shipment to the customer. About 10% of the material is lost due to fall off and waste during production. Duty is assessed at 5% of cost. Each company faces a 10% carrying cost. Which company pays less in carrying costs and by how much?