Analyzing the Performance of an Import/Export Department William Johnston manages the import/export department of Bush Specialty Products. Because of the complexities of foreign currency transactions and the continual changes in exchange rates, Bush's management is having difficulty determining exactly how Johnston's operation is performing. You have been called in as a consultant to give advice on this performance-evaluation task.
After you discuss the problem with Mr. Johnston, he produces the summary of his department's activities shown below. The letters FC identify foreign currency units, and exchange rates are defined as $/FC.

Required
a. Prepare, in good form, schedules to calculate the profit contribution or loss realized by the import/ export department.
b. Write a short memorandum to top management regarding your findings. Should Mr. Johnston be fired? Explain.

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Import Transactions Unit Cost (FC) Spot Rate When Purchased Spot Rate When Paicd Unit Selling Quantity-Part No. Price 2,000 K14 17,000- -KRO8 6.4 10.0 8.2 25.2 $0.83 0.49 1.13 0.37 $0.80 0.58 1.22 0.32 S 7.75 6.00 10.00 9.20 10,000 M290.. Export Transactions Unit Price (FC) When Sold When Collected Cost Unit Selling Spot Rate Spot Rate Quantity Part No. 14,000-A24 6,000-002.... 20,000-A27 8.4 12.5 10.0 14.6 $0.27 2.00 1.10 0.63 $0 29 1.92 1.16 0.58 s 1.98 24.00 8.90 8.50 ,000-823 Forward Contracts Quantity of FC Purchased (Sold) Spot Rate at Forward Rate Inceptionat Inception Spot Rate Purpose of at MaturityContract 210.000..^ (300,000). 1,000,000. $0.57 0.88 0.28 0.75 $0.62 0.90 0.25 0.74 S0.59 0.87 0.22 0.85 Hedge Hedge Speculation Speculation (1,000,000).