After MEXIT the exchange rate value of $M fell from $C1.40 to the current rate of $C1.12.
Fantastic news! We've Found the answer you've been seeking!
Question:
After MEXIT the exchange rate value of $M fell from $C1.40 to the current rate of $C1.12. This has meant that the material imports from CETA have become significantly more expensive. The translated cost of these imported materials from CETA in the current P/L account is $M’1,100,000. The purchasing team have identified an alternative domestic supplier source for all of the imported materials from CETA, who will charge Telford Engineering the same amount as it originally cost the company to import these materials at the pre-MEXIT exchange rate.
TELFORD ENGINEERING P/L account: | |||
Menai $,000 P/L (before MEXIT) | Menai $,000 Actual P/L (one year after MEXIT under outsource option) | ||
Sales | 8,000 | 7,200 | |
* Note: Exports to CETA based customers pre-MEXIT = 40% and the volume of these fell by 30% post-MEXIT | |||
Costs | Production costs | ||
Materials ** | -2,000 | -2,160 | |
** Note: 50% of imports Pre-MEXIT are from CETA based suppliers | |||
Staff costs | -1,500 | -1,800 | |
Overheads | -300 | -300 | |
Distribution costs | |||
Staff costs | -600 | -680 | |
Other costs | -160 | -160 | |
Gen Admin costs | |||
Staff costs | -900 | -1,000 | |
Other costs | -200 | -200 | |
Accounting costs * | -800 | -700 | |
Finance costs | -100 | -100 | |
Net profit | 1,440 | 100 | |
Exchange rate: C$/M$ | 1.40 | 1.12 | |
Related Book For
Corporate Finance A Focused Approach
ISBN: 978-1439078082
4th Edition
Authors: Michael C. Ehrhardt , Eugene F. Brigham
Posted Date: