Assume that you are the manager of a U.S. company and you face an exchange rate of ¥150 per $1
Whenever you receive an order, rather than ship from your production facilities, you call in the order to a Japanese company and have the bill shipped to you directly. If the bill shipped to you is ¥7,500 and you can collect $55 per item sold to your customer, what would be your profit if you pay the Japanese company ¥7,500?
A) $5.00 per item
B) $4.75 per item
C) $4.50 per item
D) $4.00 per item
Answer: A
Explanation: A) By paying the Japanese company, you are converting yen into dollars and getting:
= $50 per item. Because you collect $55 per item sold to your customer, your profit per item is $55 - $50 = $5 per item.
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