Hello everyone. Just would like to share some tips on how to solve the 6 strategic options question.
Firstly, for every answer that you have calculated, you would have to subtract 100 as the question is asking for effect on net profit.
Q1: You would have to obtain the new sales amount.This is by calculating the pre-mexit export volume and then multiplying it with 30% to obtain the loss. Next, add this figure with the after-mexit sales figure.
Now for the cost of materials, firstly is to calculate the percentage of sales to the nearest whole percentage which is 2160/7200=30%. Then, multiply this with the sales loss figure. Add this to the current material cost to get the total cost of materials. And you would be able to obtain the net profit figure.
Q2: This question is asking for the new figure of the material cost. The trick to this question is to translate it back to CETA dollars. Hence, calculate the translation of $M1,100 000(C1) into $C using the current rate. Once you have that figure, translate it back into $M using the old exchange rate to obtain the original cost to the company to import these materials at the pre-MEXIT exchange rate(C2).Lastly, just take $M(2160 and minus C1 and add back C2).
Hope this knowledge helps those in need. I have suffered to complete these too and that's why would like to share it to others who have been finding it impossible to solve the question.