Clark Stone Purchases Raw Material from Its Foreign Supplier, Rinne

question 29

Multiple Choice

Clark Stone purchases raw material from its foreign supplier, Rinne Clay, on May 8. Payment of 1,500,000 foreign currency units (FC) is due in 30 days. May 31 is Clark's fiscal year-end. The pertinent exchange rates were as follows: How much Foreign Exchange Gain or Loss should Clark record on May 31?

• A) $0.
• B) $30,000 gain.
• C) $30,000 loss.
• D) $60,000 gain.
• E) $60,000 loss.

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Definitions:

Operating Leverage

A measure of how sensitive net operating income is to a given percentage change in dollar sales.

Net Income

The total profit of a company after all expenses and taxes have been subtracted from total revenue.

Contribution Margin

The difference between sales revenue and variable costs, indicating the contribution of sales to fixed costs and profits.

Sales Increase

A rise in the volume or amount of products or services sold by a business.