Falmouth Kettle Company, a U. S. corporation, sells its products in the United States and Europe. During the current year, selling, general, and administrative (SG&A) expenses included: Personnel department $500
Training department 350
President’s salary 400
Sales manager’s salary 200
Other general and administrative 550
Total SG&A expenses $2,000

Falmouth had $16,800 of gross sales to U. S. customers and $4,200 of gross sales to European customers. Gross income (sales minus cost of goods sold) from domestic sales was $4,200 and gross income from foreign sales was $1,400. Apportion Falmouth’s SG&A expenses to foreign source income using the following methods:

a. Gross sales
b. Gross income.
c. If Falmouth wants to maximize its foreign tax credit limitation, which method produces the better outcome?