Hedging Currency Risks at Aif

• Net profit margin has been negative and no major patterns over the 9 year period on net profit since the trend of the industry is based mostly on economic factors, and whether or not they secure contracts. Due to high percentage of COGS they are only left with a net profit of $980 or

Compute the projected profit for the order quantities suggested by the management team under three scenarios: worst case in which sales = 10,000 units, most likely case in which sales = 20,000 units, and best case in which sales = 30,000 units.

7. Overall, the increase in net loss was primarily due to the lower-than-expected sales price and the increase in both marketing and fulfillment expenses.

The goal of this case is to help Sandra Meyer develop a presentation to address Henry Bosse’s concerns about international investments. The general idea is to demonstrate to Henry the benefits of international diversification, if any. To achieve this goal, you need to have a view on 1) the impact of foreign exchange (FX) rates on the return and risk of international investments, and 2) the impact of having more assets on the return and risk of the investment portfolio To form views on these two points, answer the following questions: I. The impact of FX rates on the risk and return of foreign investments 1a) Using data in Appendix A, calculate the

The most suitable costing method Yeltin should adopt is the practical capacity in order to remove the factor of uncertain budgeted sales figure. For this approach and the practical capacity of 65000-22000 units, then the revised overhead costs come out to be $30. With the inclusion of material and labor costs, the cost of the cartridge stand at $52 and the additional royalty expense of $10 raises the overall per unit cost to $62. The selling price of the cartridge is fixed at $150. With this selling price, the gross margin is equal to $88. The gross margin percentage is equal to 59%. In comparison to the budgeted volume, the gross margin has increased by 14%. See below

There would still be a net loss in 2006 due to the increase of break-even point, which increased from $7,505 to $8,640.

In our second assumption, instead of using the cost of goods per cases in 1986, we try to use the percentage it counts in the total expenses which is 50.4% and to find the sales needed to break-even. The detail of the calculation is shown in the answer for questions d. The result is that 95,635, a little bit higher than the estimated sales of 90,000.

Net Loss – The combination of the operating gain and the non-operating loss produced a net loss of $51k compared to a budgeted loss of $22k. YTD operating and non-operating gains are $48k compared to a budget of $712k.

The $320,000, on the other hand, is a fixed cost associated with the proposed addition.

The revenue is $600,600*1.2= $720,720. The variable cost changes as sales increases and fixed cost stays the same, the gross profit is $175,500. After tax, the net income is $100,557.

Although the company made strategy through original cost system, it is still unclear why the profit was declining. Might be some problem when the company was allocating the cost on both lines, and the methods to allocate will route a wrong strategy for the company.

* AIFS organizes educational and cultural exchange programs throughout the world. AIFS receives most of its currencies in American dollars (USD but it incurs costs in other currencies mainly in Euros (EUR) and Pounds (GBP).

The internal sales data showed that the business would need $45,000 in monthly revenue to break even. The sales forecast which have been prepared keep in mind a 65% gross margin, however, based on actual figure for 2009, this target has not been reached, and the forecasted sales have fallen.

AIFS is an American based company that offers travel abroad and exchange study services to both college and high school students. While AIFS’s revenues are denominated in American Dollars (USD), most of their costs are in foreign currencies as Euros (EUR) and British Pounds (GBP). Consequently, foreign exchange hedging has a crucial importance for the company because it provides protection against different types of risk that derive from its activity.

Those expenses act as a natural hedge that decreases the total exposure of Aspen to foreign exchange risk. For its revenues and expenses, after “natural hedging”, the overall exposure of Aspen to foreign exchange risk is $9,484,000, with Belgium