Now, turning your attention to Billabong, a sportswear firm in Australia, has a subsidiary in the US that manufactures and sells clothing and accessories in the US.
Please design an excel spreadsheet to achieve the goals outlined below. (Hint: Use Goal Seek and/or Solver Functions in Excel.)
You are required to show all your workings in Excel:
a) What are the operating cash flows in A$ and U$? (5 marks)
b) How many units do Billabong need to sell to break-even in operating cash flows in $ AUD?
(5 marks)
Ignore part (a) and part (b) above for the following questions, and assume that the normal sales are 40,000 Units for the rest of the questions.
c) What are your operating cash flows in A$ now? (5 marks)
d) If the spot rate increases to A$ 2.50 /U$, Billabong would like to pass all benefits to its clients by reducing the selling price. What would be the new selling price that would enable Billabong to maintain its profit (operating cash flows in $AUD) in Part (c), and which would pass all benefits to its client at the same time? (5 marks)
Sample Solution
