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A US based computer manufacture produces and sells laptops in South America thro

ID: 2803922 • Letter: A

Question

A US based computer manufacture produces and sells laptops in South America through two manufacturing facilities: one in Argentina and the other in Brazil. The following applies:

Argentina

Brazil

Investment price

200 million US$

200 million US$

Cost per Laptop

900 pesos

600 reals

Price per Laptop

1200 pesos

800 reals

Projected Annual Earnings

150 million pesos

100 million reals

Exchange Rate

Pesos 3 / US$

Reals 2/US$

Which statement is true?

Argentina has a higher mark-up in USD on laptops than Brazil

Brazil has a cost advantage over Argentina

Argentina has a cost advantage over Brazil

None of above

Argentina

Brazil

Investment price

200 million US$

200 million US$

Cost per Laptop

900 pesos

600 reals

Price per Laptop

1200 pesos

800 reals

Projected Annual Earnings

150 million pesos

100 million reals

Exchange Rate

Pesos 3 / US$

Reals 2/US$

Explanation / Answer

Exchange Rates:

Argentina: $1 = 3 Pesos or say 1 Pesos = 1/3 $

Brazil: $1 = 2 Reals or say 1 Real = 1/2 $

Calculation of sundry elements in USD $

Particular

Argentina

Brazil

Remarks

Working

Amount $

Working

Amount $

Investment Prise

Given in $

200 m

200 m

Same

Cost per Laptop

900*1/3

300

600*1/2

300

Same

Price per Laptop

1200*1/3

400

800*1/2

400

Same

Projects Annual Earning

150m*1/3

50m

100m*1/2

50m

Same

Conclusion: As we can see that bot country’s operation are same in all elements; so we conclude that None of the given statement is true.

Thanks

Particular

Argentina

Brazil

Remarks

Working

Amount $

Working

Amount $

Investment Prise

Given in $

200 m

200 m

Same

Cost per Laptop

900*1/3

300

600*1/2

300

Same

Price per Laptop

1200*1/3

400

800*1/2

400

Same

Projects Annual Earning

150m*1/3

50m

100m*1/2

50m

Same

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