On October 1, 2011, Eagle Company Forecasts the Purchase of Inventory

question 21

Multiple Choice

On October 1, 2011, Eagle Company forecasts the purchase of inventory from a British supplier on February 1, 2012, at a price of 100,000 British pounds. On October 1, 2011, Eagle pays $1,800 for a three-month call option on 100,000 pounds with a strike price of $2.00 per pound. The option is considered to be a cash flow hedge of a forecasted foreign currency transaction. On December 31, 2011, the option has a fair value of $1,600. The following spot exchange rates apply:

What is the amount of Cost of Goods Sold for 2012 as a result of these transactions?

• A) $200,000.
• B) $195,000.
• C) $201,000.
• D) $202,600.
• E) $203,000.

Understand that personal and societal costs and benefits guide human decisions in predictable ways.

Understand the concept of rational decision-making in economics.

Comprehend how changes in personal benefits and costs influence behavior.

Recognize the impact of incentives on individual and group behavior.

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Definitions:

Irrational

Acting without or against reason; not based on logical, rational thinking.

Immoral/Unethical Acts

Behaviors or actions that are considered wrong or unacceptable based on societal norms or ethical standards.

Non-Deontology

A term incorrectly formed and likely refers to ethical theories not based on duty or rules, such as consequentialism or virtue ethics; however, the correct term does not exist in standard ethical discussions, so I'll mark it as NO.

Intrinsic Worth

It refers to the inherent value that something has in itself, irrespective of its utility to others.