Assume that you are the manager of a U.S. company and you face an exchange rate of ¥120 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 $65 per item sold to your customer, what would be your profit per item be if you pay the Japanese company ¥7,500?
A) $1.50 per item
B) $1.60 per item
C) $2.50 per item
D) $2.80 per item
Answer: C
Explanation: C) By paying the Japanese company, you are converting yen into dollars and getting:
= $62.50 per item. Since you collect $65 per item sold to your customer, your profit per item is $65.00 - $62.50 = $2.50. This is a profit of $2.50 per item.
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