Case Study: Multi Quimica do Brasil

1289 Words Jun 16th, 2009 6 Pages
SUMMARYMultiquimica do Brasil (MB) is the wholly owned Brazilian subsidiary of Multichemical Industries, Inc, of the United States formed in 1993 with the initial purpose of establishing manufacturing facilities for agricultural chemical, industrial chemical, and pharmaceutical products in Brazil. Multichemical Industries, Inc sold 75 different products in over 50 countries during 1998. The company’s principal product groups were: pharmaceuticals, industrial chemicals, agricultural chemicals, and petrochemicals. Multichemical’s overseas subsidiaries accounted for 35% of sales in 1998, with the majority of the activity taking place in Europe.

MB is responsible for all-Brazilian manufacturing and sales of Multichemical's principal chemical
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This estimate then served as the basis for raising the then-current sales price. In other words, they passed along the expected loss due to the devaluation of the real to the customers. As a result of this policy, product prices were revised monthly.

The forward price (or sometimes forward rate) is the agreed upon price of an asset in a forward contract. Using the rational pricing assumption, we can express the forward price in terms of the spot price and any dividends etc., so that there is no possibility for arbitrage.

By setting a certain price in a certain currency (in this case Brazilian real) a company can avoid problems if there is any case of rising currency rate. The price for a asset is already set for the future contract so no matter what condition the market is in the price of the asset will remain the same.

3. How did the new performance evaluation system--Full responsibility Accounting-- differ from the old?At Multiquimica do Brasil they can now trace costs, revenues, or profits to the individual product managers and product group managers who are primarily responsible for making decisions about the costs, revenues, or profits in question and taking action about them. The new system called Responsibility accounting is appropriate where top management has delegated
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