The Cramer Cookie Company is a relatively new company and so far has sold its pr

Question

The Cramer Cookie Company is a relatively new company and so far has sold its products only in its home country, Denmark. In December, Cramer determined that it had excess capacity to produce more of its special Christmas cookies. It is trying to decide whether to use that capacity to ship a batch of cookies overseas. The marketing department has determined that the United States and Great Britain are the two most viable markets. Cramer has enough excess capacity to produce only one batch, which can be shipped to either country. The materials and labor cost to produce the batch amount to 8,500 kroner. The marketing department, which located a shipping company that could deliver to either location, also provided the following information:

United States Great Britain
Shipping cost 3,000 U.S. dollars 2,000 U.S. dollars
Duties/customs charges and miscellaneous selling expenses 400 U.S. dollars 480 British pounds
Total sales revenue 5,200 U.S. dollars 2,800 British pounds
Exchange rate data 1 krone = 0.147
U.S. dollars 1 krone = 0.088
British pounds

Explanation / Answer

Exge rate: 1Kr = $0.147 Cost of material = Kr8500 = 8500*$0.147 = $1249.50 Add: Shipping cost $3000 Add: Misc selling exp $400 ------------------------------------ Total COGS = $4649.50 -------------------------- Sales rev = $5200 less COGS = $4649.50 -------------------------- Profit = $550.50 or Kroner($550.50/$0.147) = Kr3744.90

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