Bpp revsion kit question 11 (SBERRY)

50000 x 50% x 2.4 x 2 = cost of imported materials in K$ as 1 D$ = 2 K$.

Divideng by 2.2 converts back to D$ when the D$ strengthens by 10% ie 2 x 1.1 = 2.2.

It is multiplied by 2…..that was your original question.

I don’t have access to the BPP book right now. But looking at the ACCA question and answer published on their site:

For Red:

Demand in Kayland = 50,000 and SP in K$ = 8 so revenue in K$ = 400,000.

At the current exchange rate of 2 this is 400,000/2 = D$200,000
At exchange rate of 2.2 this is D$181,818
At exchange rate of 1.8 this is D$222,222

Costs – 50% of material imported from Kaylan, so for Red the cost of D$2.4 is made up of D$1.2 costs in incurred in Deeland. The other half of the D$ cost is the converted cost from goods imported from Kayland. That has been translated at 2 for the budget, so was 2 x 1.2 – 2.4 K$. If the exchange rate changes to 2.2 then this cost in D$ will be only 2.4/2.2.