Montana Company Reported the Following Operating Results for Year 1

question 70

Essay

Montana Company reported the following operating results for Year 1 and Year 2: $\begin{array}{|l|l|l|}\hline 2013 & \text { Amount }&\% \text { of Sales }\\\hline \text { Sales } & \underline {\$ 800,000} \\\hline \text { Cost of goods sold } & \underline {440,000} \\\hline \text { Gross margin } & 360,000 \\\hline \text { Operating expenses } & \underline {225,000} \\\hline \text { Income before taxes } &135,000 \\\hline \text { Income taxes } & \underline { 40,000 } \\\hline \text { Net income } & \underline { \$ 95,000} \\\hline\end{array}$

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Definitions:

Nominal Exchange Rate

The rate at which one country's currency can be exchanged for another country's currency, not adjusted for inflation.

Real Exchange Rate

The real exchange rate compares the relative price of goods and services between countries, adjusted for differences in price levels.

Nominal Exchange Rate

The rate at which one country's currency can be exchanged for another country's currency.

Real Exchange Rate

An exchange rate that has been adjusted for the relative purchasing power of the two currencies, reflecting the quantity of goods and services one currency can buy in another country.