An Australian Company Has Received USD in Payment for Goods

question 24

Multiple Choice

An Australian company has received USD in payment for goods exported.At the time of receiving the USD,the exchange rate is quoted as AUD/USD 0.5650.Rather than immediately converting the USD into AUD,the company decides to 'speculate' on a favourable movement in the exchange rate.In 'today + n days' the exchange rate is AUD/USD 0.5750.Which of the following statements is correct?

• A) The company has taken a 'long' position in the USD.
• B) The exporter company has made a loss on its FX position.
• C) The opportunity cost of interest forgone will affect the profitability of the FX position.
• D) All of the given answers are correct.

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Definitions:

Current Month

The current month refers to the ongoing month or the present period under consideration or review.

Weighted-Average Method

An inventory costing method that calculates cost of goods sold based on the weighted average cost of all items available for sale.

Equivalent Unit

An equivalent unit is a concept used in cost accounting to denote the amount of work done on units of production expressed in terms of fully completed units, facilitating the calculation of costs in a process costing environment.

Fabricating Department

A division within a manufacturing company where raw materials are assembled or processed into finished goods.