Exhibit 1: Pre-Brexit Income Statement, Assuming £1.00 = €1.36 Per Unit Quantity (Units) € £ Sales in the U.K. £200 40,000 8,000,000 U.K. Costs · Contract Labor (variable cost £5 each) £5 40,000 200,000 · Import of Coffee Machines (invoiced at €90 each) €90 40,000 3,600,000 2,647,059 · Marketing and Distribution Costs (Fixed costs) 400,000 · Other Fixed Costs: Overheads, Interest, Depreciation, Rent, Salaries, etc. 500,000 Profit (U.K. Subsidiary) £4,252,941 (€5,784,000) Recalculate the income statement above using the post Brexit exchange rate of £1.00 = €1.16, assuming that there are no changes in prices charged by the company to U.K. buyers. Calculate profits in both pounds and euros. Fill out Exhibit 2 below with your answers:
Exhibit 1: Pre-Brexit Income Statement, Assuming £1.00 = €1.36 Per Unit Quantity (Units) € £ Sales in the U.K. £200 40,000 8,000,000 U.K. Costs · Contract Labor (variable cost £5 each) £5 40,000 200,000 · Import of Coffee Machines (invoiced at €90 each) €90 40,000 3,600,000 2,647,059 · Marketing and Distribution Costs (Fixed costs) 400,000 · Other Fixed Costs: Overheads, Interest, Depreciation, Rent, Salaries, etc. 500,000 Profit (U.K. Subsidiary) £4,252,941 (€5,784,000) Recalculate the income statement above using the post Brexit exchange rate of £1.00 = €1.16, assuming that there are no changes in prices charged by the company to U.K. buyers. Calculate profits in both pounds and euros. Fill out Exhibit 2 below with your answers:
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
Exhibit 1: Pre-Brexit Income Statement, Assuming £1.00 = €1.36
|
|
Per Unit |
Quantity (Units) |
€ |
£ |
|
Sales in the U.K. |
£200 |
40,000 |
|
8,000,000 |
|
U.K. Costs |
|
|
|
|
|
· Contract Labor (variable cost £5 each) |
£5 |
40,000 |
|
200,000 |
|
· Import of Coffee Machines (invoiced at €90 each) |
€90 |
40,000 |
3,600,000 |
2,647,059 |
|
· Marketing and Distribution Costs (Fixed costs) |
|
|
|
400,000 |
|
· Other Fixed Costs: Overheads, Interest, |
|
|
|
500,000 |
|
Profit (U.K. Subsidiary) |
|
|
|
£4,252,941 (€5,784,000) |
- Recalculate the income statement above using the post Brexit exchange rate of £1.00 = €1.16, assuming that there are no changes in prices charged by the company to U.K. buyers. Calculate profits in both pounds and euros. Fill out Exhibit 2 below with your answers:
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