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On November 2,20X9,Henry Company purchased a machine for 100,000 Swiss francs (CHF) with payment requirement on March 30,20X10.To eliminate the risk of foreign exchange losses on this payable,Henry entered into a forward exchange contract on November 3,20X9 to receive CHF 100,000 at a forward rate of CHF1 = $2 on March 30,20X10.The spot rate was CHF1 = $1.95 on November 2,20X9 and CHF1 = $1.97 on December 1,20X9.What is the amount of the premium or discount on the forward exchange contract on December 1,20X9?
Variable Cost
Costs that vary in total in direct proportion to changes in the level of activity or volume of production.
Operating Leverage
The degree to which a firm or project can increase operating income by increasing revenue, reflecting the proportion of fixed costs to variable costs.
Financial Leverage
The use of borrowed funds to increase the potential return of an investment, which can also increase the risk of loss.
Fixed Costs
Expenses that do not change with the level of production or sales, such as rent, salaries, and insurance.
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