Short-Term Profit Planning in an International Setting Essay

Short-run Net income Planning in an International Setting Gus Gordon University of Texas at Tyler David E. Stout Youngstown State University Sarah Hartzog. Student Former Student. Milsaps College Matt Lusty. Student Former Student. University of Texas at Tyler In add-on to SEWMEX. SEW has several other mills located in the southeasterly portion of the U. S. One of the mills ( located in southeasterly Mississippi ) besides serves as a distribution centre and cardinal warehouse where finished goods from all the other mills are stored and finally shipped. From this distribution centre. SEW supplies clients in all 50 provinces and Canada. The accountant of SEW late resigned out of the blue after a dissension with the president of the company. After his going. many of his computations refering SEWMEX cryptically disappeared. Given the cost of labour in the U. S. mills. the president of SEW would wish to direct every bit much hereafter production to SEWMEX as possible.

The SEWMEX operation is comparatively new. nevertheless. and non yet profitable. Therefore. both SEW and SEWMEX could profit from profit-planning exercisings. As a start. the president would wish for you. in your capacity as adjunct accountant. to develop a cost-volume-profit ( CVP ) theoretical account for the SEWMEX installation. which theoretical account could be used to turn to a figure of short-run profit-planning issues. In peculiar. the president would wish to acquire a better grip on precisely what volume of end product would be needed to do SEWMEX profitable in the short tally ( given the present mix of garments produced ) and what schemes might be pursued longer term to better operations and hence profitableness. The president besides wonders how. if at all. the issue of foreign 1

Jay Nelson. Student Former Student. University of Texas at Tyler

Introduction
SEWMEX is a freshly formed run uping mill located in Mexico. SEWMEX. owned by an American company. is incorporated in Mexico as a Mexican company. and is enrolled in the maquiladora program1 in Mexico. By contract. the American
parent company. SEW Inc. ( henceforth referred to as SEW ) . purchases all of SEWMEX’s end product. SEW provides all natural stuffs to SEWMEX. These minutess occur under the maquiladora system and North American Free Trade Agreement ( NAFTA ) regulations so that no import or export responsibilities are required on these transportations. Because of this. the maquiladora is responsible merely for piecing the natural stuffs into finished merchandises and so transporting the completed merchandises back to SEW in the U. S. As a consequence. SEWMEX has no natural stuffs cost. To be able to run into first-come-first-serve orders without waiting for stuffs to be imported. nevertheless. SEWMEX does keep a little stock list of finished merchandise. 1

Maquiladora is the name for a Mexican mill whose primary intent is to assemble natural stuffs into a concluding merchandise and so export that concluding merchandise to the state of beginning ( e. g. . the U. S. ) . The maquiladora ( or maquila ) is non the proprietor of record of the natural stuffs or any stock list. as the natural stuffs are imported temporarily under bond and must. by jurisprudence. be used to piece a concluding merchandise and so be exported back to the proprietor of record. in this instance SEW. IM A ED U C ATIO NA L C A S E JOURNAL

exchange rates might perplex the profit-planning procedure. Therefore. he has charged you with the duty of developing the CVP theoretical account for SEWMEX. while he looks for a new accountant. As person interested in doing a positive feeling on the president. you are eager to accept this assignment.

Table 1 SEWMEX—Average Contracted Gross saless Monetary values per Garment. by merchandise line Product Line Average Selling Price per Unit

Fact
When you were hired by SEW. the accountant of the company explained that in the stitching industry it is normal to be and monetary value garments on the footing of what is called “standard allowed minutes” ( SAMs ) associated with the production of each garment. 2 In fact. in the stitching industry. production is frequently measured in these footings instead than in units of finished merchandise. The accountant had explained to you that SAMs are based on production engineers’
estimations of clip needed to execute each stitching operation and hence the entire clip required to finish a peculiar manner garment. The estimations are derived from time-and-motion ( i. e. . industrial technology ) surveies and take into history a figure of variables. including the velocity of each type of run uping machine required for a specific operation. the education/training of each operator. and bing engineering used by the assembly workers at SEWMEX.

Bloomerss Shirts Jackets Other

$ 7. 00 $ 6. 00 $ 25. 00 $ 3. 00

( Notes: The contract between SEW and SEWMEX explicitly states that SEW will pay SEWMEX in U. S. dollars. USD. Besides. the above selling monetary values per unit represent norms within each merchandise line. given an false mix of garments within each line. )

BUDGETED Selling Monetary value In fixing you for this undertaking. the president of SEW provided you with the per-unit merchandising monetary value informations presented in Table 1. 3 The monetary values listed in Table 1 are expressed in U. S. dollars ( USD ) and are based on SEW’s transportation price4 finding for each garment and an initial gross revenues mix of merchandises obtained from the company’s selling section. On the footing of treatments with the company’s audit house. the merchandising monetary values represented in Table 1 were deemed acceptable for U. S. income revenue enhancement intents. Further. these monetary values are assumed to be valid within the shortterm planning skyline associated with the building of the CVP theoretical account you’ve been asked to develop. 2

BUDGETED PRODUCTION/SALES MIX Information about planned production/sales degrees on a monthly footing for SEWMEX. by merchandise line. is given in Table 2. 5 This information was provided to you by the president of SEW. The SAM values reported in Table 2 represent the mean figure of standard proceedingss needed to do each type garment. As celebrated above. these estimations are based on the bing engineering used in the fabrication procedure every bit good as the current accomplishment degrees for assembly forces. As can be seen from Table 2. sum
productive end product. expressed on a monthly footing and in footings of SAMs. is presently planned at 2. 500. 000 proceedingss. Because SAMs are interpreted as standard labour times for the assorted garments manufactured. they reflect a peculiar degree of efficiency on the portion of assembly forces at the SEWMEX works. 6 Table 2 Current monthly production program for SEWMEX ( expressed in proceedingss [ SAMs ] ) . by merchandise line and in entire Average SAM per Unit of Product ( in proceedingss ) Monthly Planned Production Level ( in proceedingss [ SAMs ] )

Surface-to-air missiles are the equivalent of standard labour times used to bear down direct labour cost to work-in-process ( WIP ) stock list ( and finished goods stock list ) and to cipher direct labour discrepancies under a criterion cost system. As explained subsequently. the monetary values listed in Table 1 are mean monetary values of garments within each merchandise line. based on an false mix of different manners and options within each of the four merchandise lines. A “transfer price” is the sum assigned to interdivisional transportations of goods or services within a corporation. Such monetary values represent “sales revenue” to the merchandising division and “costs” to the buying division. As such. they can be used to measure the fiscal public presentation ( e. g. . ROI ) of both divisions. When amalgamate fiscal statements are prepared. as in the instance here with SEWMEX and SEW. the consequence of any intra-company minutess are eliminated so that the sum of net income reported reflects minutess with external parties merely. IM A ED U C ATIO NA L C A S E JOURNAL

Merchandise Line

Bloomerss Shirts Jackets Other Sum

50 40 90 20

1. 200. 000 1. 000. 000 200. 000 100. 000 2. 500. 000

The gross revenues mix reflected in Table 2 is judged by the president of SEW to be comparatively stable in the close term and hence suited for usage in building a CVP theoretical account for SEWMEX.

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SOME SIMPLIFYING ASSUMPTIONS In your treatments with the president. he emphasized to you the point that the per-unit gross revenues monetary values ( Table 1 ) and mean per-unit-of-output SAMs ( Table 2 ) represent wide norms within each merchandise line. In actuality. there are more than 200 different manners of bloomerss. over 200 different manners of shirts. more than 50 different manners of jackets. and about 50 different manners in SEW’s other merchandise line. For illustration. as reported in Table 2. the SAM for the mean brace of bloomerss is 50 proceedingss. Based on technology estimations. nevertheless. the SAM for a peculiar manner of bloomerss within this merchandise line would probably be different from 50 proceedingss.

Therefore. the mean figures reported in Tables 1 and 2 are to be interpreted as leaden norms within each merchandise line. where the weights in finding the norm are based on an false mix of manners. For illustration. in the bloomerss merchandise line. it is assumed that a certain per centum of end product would be manner # 1. a certain per centum would be manner # 2. etc. Further. the planned production degrees reflected in Table 2 ( i. e. . allotment of 2. 500. 000 SAMs. per month. across merchandise lines ) are themselves brooding of an false production/sales mix across merchandise lines. Your initial reaction to the information presented in Tables 1 and 2 is twofold: ( 1 ) the profit-planning context you were charged with mold is surely a batch more complex than the more straightforward jobs you addressed in the schoolroom. and ( 2 ) in the present instance at that place seems to be an about bewildering array of combinations of products/outputs.

After all. a standard gross revenues mix is assumed both within and across merchandise lines. You are diffident. hence. whether the job at manus is at all manipulable. You were relieved. nevertheless. that in farther conversations with the president of SEWthe two of you came to an understanding that you could presume for the foreseeable hereafter that the mix reflected in Tables 1 and 2 would probably be stable and hence appropriate to utilize in the short-run profit-planning ( i. e. . CVP ) theoretical account you would be constructing. Therefore. you can presume that the informations presented in Tables 1 and 2 are valid for building your initial CVP theoretical account for SEWMEX.

Factory CONFIGURATIONS As indicated in Figure 1. SEW has a six mills. five in the U. S. and one in Mexico ( SEWMEX ) . SEW has chiefly followed a theoretical account of specialisation. Four of the five U. S. mills produce merely a individual merchandise line: two of the mills produce bloomerss. two others produce shirts. while the 5th U. S. mill produces jackets. The 4th merchandise line ( dubbed “other” ) consists of garments that are non exactly jackets but are similar in design to jackets ; these garments are produced in the jackets mill. By contrast. SEWMEX produces all four merchandise lines and therefore can be distinguished from the other five mills in the SEW household. Figure 1 Geographic Plant Locations—U. S. and Mexico

SEW’s experience with its specialisation theoretical account has shown that a work force of more than about 125 people in the mill creates diseconomies of graduated table and that fewer than 125 does non let for optimal efficiency. SEWMEX. nevertheless. embraces a different operating model–it is a big mill bring forthing all merchandises in the same installation. Due to cultural differences and the non-specialized attack to be followed at SEWMEX. the president of SEW is unsure how this operating theoretical account will impact assembly labour productiveness and hence profitableness of the SEWMEX mill.

6

In the context of the SEWMEX. “efficiency” can be interpreted as the figure of SAMs ( end product ) produced per month expressed as a per centum of the entire clip worked. Therefore. increased efficiency would be reflected by end product per month ( measured in SAMs ) greater than the entire SAMs reflected in Table 2.

THE STRATEGIC IMPORTANCE OF EFFICIENCY TO THE FINANCIAL SUCCESS OF SEWMEX You
hold come to recognize that given the nature of the company’s merchandises and the associated production procedure. labour efficiency is the key to profitableness. After all. efficiency is truly another step of throughput: the greater the 3

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throughput. the greater the volume of end product for a given sum of labour. all things equal. You realize. so. that efficiency in the fabrication procedure is of import to understand in developing a short-run profit-planning theoretical account for SEWMEX. If the assembly workers in any given month produce harmonizing to the planned SAMs reflected in Table 2. we could state that they are working at planned. or expected. efficiency. In any given month. if more Surface-to-air missiles are produced than what was planned ( presuming the same figure of assembly workers employed during the month ) . so efficiency would be higher than what was planned ( and viceversa ) .

Higher labour efficiency ( productiveness ) should interpret to greater runing income/profit. Based upon anterior experience in reexamining the production studies of each mill in the SEW household. you know that the five U. S. mills average about 85 % efficiency. Assuming a 40-hour work hebdomad in the U. S. . an operator at 100 % ( i. e. . “standard” ) efficiency would be capable of bring forthing end product represented as 2. 400 ( i. e. . 40 hours/week ? 60 minutes/hour ) SAMs for the hebdomad. 7 That means. on norm. that each SEW operator in the U. S. is bring forthing end product per hebdomad of about 2. 040 SAMs ( i. e. . 2. 400 ? 0. 85 ) .

The more you thought about this thought of efficiencies and related end product. the more you realized that you could really calculate the planned efficiency for the SEWMEX works for a given clip period ( such as a month ) . similar to the U. S. computation presented above. The SAMs reported in Table 2 represent a planned degree of entire end product and planned merchandise mix for a typical month. As portion of SEWMEX’s direction information system. each machine operator turns in. at the terminal of the twenty-four hours. a signifier that has a saloon codification for each operation performed during the twenty-four hours by that operator. As good. the saloon codification identifies the merchandise line ( or lines ) worked on during the twenty-four hours by theworker.

In short. these signifiers contain informations on end product. SAMs. merchandise line. production order. and so forth. At the terminal of the twenty-four hours. the saloon codifications are read by optical readers ; efficiency degrees for operators. merchandise lines. and the works as a whole are determined utilizing information obtained in this mode.

SAM values for their operations are considered direct labour and that both he and the former accountant had felt that to run into the planned production degrees for SEWMEX ( Table 2 ) . about 400 machine operators would be required. The information in Table 3 are based on entire employment of 500 workers. including 400 machine operators. 8

LABOR PRODUCTIVITY/EFFICIENCY In Mexico. the allowable work hebdomad before paying overtime is 48 hours. Further. in conversations with the president you know that. due to the acquisition curve and other variables. SEWMEX would probably get down at the mean degree of assembly labour productiveness that the U. S. workss enjoy. Thus. for initial planning intents sing the SEWMEX works. you and the president agreed to utilize 500 proceedingss per worker per twenty-four hours as the footing for ciphering assembly labour efficiency ( productiveness ) . 9 Further. you are to presume that 48 hours will be worked by each operator ( Monday – Friday ) without incurring overtime.

You realize that this is non precisely accurate as each work-day in Mexico really has 576 proceedingss ( i. e. . 48 hours/week ? 5 days/ hebdomad ? 60 minutes/hour ) available per hebdomad. Furthermore. you agreed with the president that in order to simplify planning. a 20-work-day month would be used and that no overtime would be budgeted. At the current exchange rate. the president reminded you that labour costs for run uping operators are presently 14. 00 USD per twenty-four hours. including paysheet revenue enhancements and other lawfully required benefits. Therefore. the cost for an operator who works a complete hebdomad without overtime is 70 ( 5 ? $ 14. 00 ) USD equivalent for the hebdomad. THE NATURE OF LABOR COSTS: U. S. VS. MEXICO You so discussed with the president an of import differentiation between U. S. and Mexican labour Torahs. The two of you discussed the fact that in the stitching industry there are sometimes periods of low demand followed by periods of high demand. SEW has solved this job in its U. S. mills by ( temporarily ) puting off production workers when 8

COST DATA FOR SEWMEX The president provided you with entire monthly estimated cost informations ( Table 3 ) . which were salvaged from the president’s last meeting with the former accountant of SEW. The president reminded you that merely assembly labour that has

Since SEWMEX manufactures all merchandise lines within one installation ( in contrast to SEW’s theoretical account of specialisation ) . SEWMEX employs more people than SEW believes is optimum for its specialisation theoretical account followed in the U. S. For illustration. presume that an assembly worker puts in 500 proceedingss in a twenty-four hours. To measure the degree of this worker’s productiveness ( efficiency ) . we need to cognize how much end product ( expressed in SAMs ) this worker produced. If the end product of the worker for the twenty-four hours ( measured in SAMs ) was 500. so that person is said to hold been working at 100 % efficiency. If the worker produced end product for which the SAMs exceeded 500. so the worker was working above 100 % efficiency. Remember that the U. S. workss for SEW mean 85 % efficiency. VOL. 5. N O. 1. ART. 1. March 2012

This end product degree is. by definition. independent of merchandise mix. See besides the subdivision titled “The Nature of Labor Costss: The U. S. vs. Mexico” subsequently in the instance. IM A ED U C ATIO NA L C A S E JOURNAL

Table 3 Monthly Budgeted Costs. in Pesos. at SEWMEX–Planned Production Levels ( per Table 2 ) ( false exchange rate. Uruguayan peso: USD = 13:1 ) Cost Description by Department Cutting and Bundling: Sum ( in Pesos )

Indirect Labor Supplies
Production:

255. 000 50. 000 1. 200. 000 300. 000 500. 000 125. 000 5. 000 200. 000 160. 000 60. 000 50. 000 40. 000 40. 000 10. 000 750. 000 250. 000 100. 000 40. 000 5. 000 4. 140. 000

Direct Labor Indirect Labor Supplies
Quality:

Labor Supplies
Care:

Labor Partss
Transportation:

Labor Other* Additional Customs Fees^
Human Resources:

Labor Other*
Administration:

General* Utilities Other
Assorted:

Labor Other* TOTAL

as rupture if an employee is terminated. even if there are programs to engage the employee back in the close hereafter. 10 You were non certain what. if any. deductions the difference in labour Torahs and company policy would hold on CVP relationships for SEWMEX ( specifically. the mix between variable and short-run fixed costs ) . but you had a gnawing feeling that it could. In discoursing the consequence of this jurisprudence with you. the president noted that it would be in SEWMEX’s best involvements to follow a policy of non ending employees in times of low demand. This would salvage the rupture wage every bit good as create greater worker trueness toward SEWMEX. which is basically a start-up company. During periods of low demand at SEWMEX. the company would non replace employees who resigned. In world. nevertheless. he felt this would be a limited figure of employees.

The president indicated that due tovarying market demands. there might be periods when an accommodation to production degrees is required in one or more of the merchandise lines. The president besides explained that SEWMEX would cross-train all operators so that workers could travel within and between production lines. a state of affairs that would afford more flexibleness in run intoing variable market demands. The president continued. stating that he and the former accountant had agreed that in doing all computations for profitplanning intents they would presume that all merchandise lines in SEWMEX had the same efficiency. That is. because of the cross-training received. all operators are assumed to be equal in footings of their ( planned ) productiveness so that the motion of operators between lines will non impact the productiveness of any peculiar merchandise line. Besides. the costs labeled as “production” in Table 3 are to be assigned to merchandise lines ( if cost assignment is necessary ) based on SAMs associated with each several line. In kernel. these costs represent costs that are traceable to each merchandise ( garment ) line.

* Assume these costs are fixed over the relevant scope of planned production. There may be other costs that could be considered fixed depending upon premises made. ^ The typical extra cost to direct or have a container. imposts securities firm and longshoremen fees. is 5. 000 pesos. The current degree of planned production at 2. 500. 000 SAMs requires cargos to dwell of one sent container and one received container per hebdomad ( 8 sum cargos in a given month ) . This implies that merchandise valued at 625. 000 SAMs is the capacity of an export container. Assume no partial containers will be sent and that. for practical intents ( given the comparatively immaterial sum to direct or have a container ) . this cost will stay as fixed over the full relevant scope.

demand beads. The president pointed out to you. nevertheless. that the state of affairs in Mexico is more complicated because Mexican labour jurisprudence does non let for such layoffs. Current Mexican jurisprudence requires employers to pay three months’ salary

Foreign EXCHANGE RATES During the meeting. the president noted that in the last few months the peso had begun to fluctuate instead drastically. He mused
that such motions were perchance a complicating factor in the profit-planning procedure since SEWMEX receives grosss in dollars and wages disbursals in pesos. The exchange rate ( pesos per USD ) over the last twelvemonth has fluctuated between 12:1 and 15:1. You and he agreed that for initial profit-planning intents. as reflected in Table 3. an exchange rate of 13 pesos to the USD could be assumed. 10

If an employee resigns voluntarily. nevertheless. the rupture payment is non required.

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CASE QUESTIONS
( Note: Please look into with your teacher to find whether you are to turn to optional inquiries 7 and 8 ) 1. Discourse what is meant by cost-volume-profit ( CVP ) analysis and the ways in which CVP can be used as a managerial tool. Include an y qualitative factors that may impact the CVP premises. peculiarly with regard to SEWMEX. 2. Cost-Behavior Issues: Specify the footings “variable cost”

2 ) . Your graph should include pre-tax net income ( ?B ) for the undermentioned values of X ( monthly volume ) : 0 to 70. 000. in increases of 5. 000 units. 4. Breakeven Calculations a. Based on the weighted-average part border per unit

and “fixed cost. ” Given the facts in the instance. place all fixed and variable costs listed in Table 3. Assume for costclassification intents that the relevant activity variable ( cost driver ) is SAMs ( or. equivalently. units produced ) . Assume farther that each line-item cost listed in Table 3 can be classified either as “fixed” or as “variable” with regard to alterations in SAMs ( units produced ) . If you feel that the cost under consideration exhibits a “mixed” behaviour ( i. e. . has elements of both fixed and variable cost ) . do your categorization determination on the footing of what you believe to be the primary cost behaviour. variable or fixed. Show amounts both in pesos and in USD. 3. Profit-Planning Model a.

Develop an equation that suitably reflects the CVPthat reflects the current production/sales program ( which you used above in Question 3 ) . what is the breakeven point. expressed both in footings of entire SAMs ( standard allowed proceedingss ) and in footings of entire end product ( units produced ) . for the SEWMEX mill as a whole? Show your computations. ( Hint: to deduce the breakeven point. utilize the equation for pre-tax net income. ?B. that you developed in response to Question 3a above. Since grosss are expressed in U. S. dollars and because the dollar is the more stable currency. base all breakevenpoint computations in dollars. ) Any premises made in your computations should be noted. B. Based on a weighted-average part border ratio.

which reflects the current production/sales program ( Table 2 ) . what is the breakeven point in dollars for the SEWMEX mill as a whole? Show computations. c. Use the Solver modus operandi in Excel to work out for the overall

breakeven point ( in entire units of merchandise per month. Ten ) . given the current production/sales program ( Table 2 ) .

relationships and depicts the short-run profitableness of the SEWMEX works before revenue enhancements. ( Hint: your equation should picture pre-tax net income per month. ?B. as a map of the degree of fixed cost per month ( FC ) . entire volume. Ten ( in units per month ) . part border per unit ( sp ? vc ) . and a production/sales mix represented by the informations reflected in Table 2. Given the unit merchandising monetary value informations in Table1 and the variable costs identified in Question 2 above. you should be able to cipher and utilize for profitplanning intents a weighted-average part border ratio and/or weighted-average part border per unit based on the production/sales mix implied by the informations in Table 2. ) B. Once the equation for short-run pre-tax net income ( ?B ) is

d. Based on the production/sales mix reflected in instance

Table 2. derive product-line breakeven points ( in units per month and in dollars per month ) . 5. Efficiency-Related Issues a. Based on the information provided in the instance ( e. g. . Table 2 ) .

what is the approximative degree of planned works efficiency ( i. e. . entire SAM end product planned per month. relation to entire proceedingss of all assembly labour in the SEWMEX works ) ? B. Based on the current production/sales mix. what

overall ( or norm ) efficiency degree at SEWMEX is required to interrupt even on a monthly footing? c. Prepare a tabular array bespeaking the monthly pre-tax income.

developed. utilize Excel to fix a profit-volume ( PV ) graph for the SEWMEX works. That is. bring forth a graph of monthly pre-tax net income ( ?B ) as a map of monthly gross revenues volume ( X ) . Clearly label the X and Y axes. the X-intercept. the Y-intercept. and the incline of the pre-tax net income map. To bring forth your graph. you will necessitate to utilize the weighted-average part border per unit at the current production/sales mix ( reflected in Table 6

?B. that would ensue from alterations in works efficiency

( as defined above in ( a ) ) over the scope 50 % efficiency to 100 % efficiency. in increases of 10 % . Assume for intents of this inquiry that demand alterations are the cause of monthly production alterations and that SEW will go on to buy all of SEWMEX’s end product. Assume. excessively. that the entire figure of assembly workers at the SEWMEX works is unchanged.

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d. Assuming labour costs per hr and in entire are held

invariable. what would do works efficiency at SEWMEX to alter? That is. from the tabular array you prepared in response to portion ( degree Celsius ) above. what inferences can you pull refering efficiency alterations for SEWMEX? 6. Drumhead Report: Based on the foregoing consequences

and analyses. sum up in a written study meant for the president of SEW the cardinal points. issues. recommendations. and hazards that are associated with the profit-planning exercising you merely completed. Your study should in some sense be viewed as a consultant’s study and as such should be clear. to the point. and polished. 7. ( Optional ) : Foreign Exchange Rates and Foreign Exchange Risk a. What is meant by the term “foreign exchange rate” ?

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In general. what causes foreign exchange rates to change over clip? B. Make alterations in foreign exchange rates benefit or hurt U. S.

companies that are making concern in foreign states?
c. Given the built-in uncertainness associated with

currency exchange rates. is at that place a possibility of cut downing the uncertainness? That is. what options are available for commanding or at least turn toing this hazard? What would you rede the president of SEW to make with regard to foreign exchange hazard? d. Given that SEWMEX receives payment in U. S.

dollars and wages disbursals in Mexican pesos. what is SEWMEX’s greatest hazard with respect to the foreign exchange rate? 8. ( Optional ) : Foreign Exchange Rates–Sensitivity Analysis:

If the exchange rate alterations to 15:1. what will be the monthly breakeven point ( in USD ) . keeping gross revenues mix. productiveness ( i. e. . entire end product ) . and selling monetary values constant? What will be the monthly breakeven point ( in USD ) if the exchange rate were 11:1? What will be the pre-tax income ( loss ) ( in USD ) at each of these two exchange rates. presuming works end product and gross revenues mix are as illustrated in Table 2 and at selling monetary values depicted in Table1? Fix a tabular array that compares these consequences to those obtained under the base-case premise ( i. e. . an exchange rate of 13:1 ) . What general point can be made on the footing of this sensitiveness analysis that you performed?

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