Question

Please answer clearly and simple as possible. Thank you in advance!

Situatie A small Canadian company has contracted to purchase 200,000 toys for 3.50 British pounds cach, from a British company. The Canadians have agreed to pay for the y la British pound sterling The Canadians have also agreed to sell the boys to a US company for USDS 5.50 per toy. The Canadia n has gredo sept US dollars from the U.S. sales but plans to convert these revenues to Canadian dollars. The Canadian company estimates its margina a l i co (arching insurance, transportation, and so onal Cd5.75 per ty Exchange rates at the time of signing the greements are as follows Caus - 4 Cads - British pound 54 Questions a) What impact drpreise US dollar to the C the impact on Revendedor Costs for 23. (hese increase of incre h ase 's a You sed place on Ams. Why? a) What impact would depreciation of the British pound relative to the Canadiand decrease profit, increases, decrease loss or no change online below) have the C a m pany's profits increase profil Ans. Why? #) What i decrease po s would a depreciation of the British Pound relative to the US dollar hame on the r loss, decrease loss o ch online below) company's profilo profit Ans. Why? If exchange rate changed to the exchange (Show profit or loss calculation clearly hou wow, stateshow the amount of the pro c he delow Cadas Cadr pound. Place word profit or loss on line Place amount online Show work clearly below.

Answer 1

1........Profit............. (CND$ 322000)

Explanation:- 0.54 pound = 1 CND or 1 pound =1/0.54= 1.85CND

Now purchasing price =3.5×1.85 =6.475  

Total cost price =(purchasing price + transportation )×quantity. =6.475+0.75 = 7.225

And 0.68 USD = 1 CND or 1USD =1/0.68 CND=1.47CND

Selling price in CND = 5.5×1.47 =8.085

Profit margin per toy =(8.085—6.475)= 1.61

Total profit = 1.61 ×200000( quantity of toys)=322000

2....... decrease

Explanation:- selling price in CND will decrease because of depreciation in the US currency. Suppose now 1CND=1USD then selling price will become 5.5 instead of 8.085

3. ...... Increase

Explanation:- Earlier 1 pound =1.85 CND , suppose due to depreciation in the pound 1 pound =1CND then purchasing price will decrease from 6.475 to 3.5 CND. As the cost price fall profit will rise.

4...... no change

Explanation — As there are not directl transactions of toys between Britain and USA.

5....... Losses ...... 181250

Explanation .... Now .40 pound =1 CND or 1 pound =1/0.4=2.5 CND

Purchasing price =3.5×2.5 =8.75

Total cost =(8.75+0.75)×200000= 1900000

And 0.64 USD =1 CND or 1USD =1/0.64 =1.5625CND

Selling price in CND = 5.5×1.5625=8.59375

Total revenue = 8.59375×200000 =1718750

Loss = 1718750—1900000= 181250