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Assume that Toyota imports dollar-denominated steel from U.S. suppliers while all other inputs are obtained from Japanese suppliers whose costs are denominated in the Japanese
Assume that Toyota imports dollar-denominated steel from U.S. suppliers while all other inputs are obtained from Japanese suppliers whose costs are denominated in the Japanese yen as shown below. If the yen appreciates from the initial exchange rate of 80/$ to 76/$, what is the yen cost of a Toyota Camry?
Hypothetical Cost of Producing a Toyota Camry in Japan |
Cost Component | Yen Cost | Dollar-equivalent Cost |
Labor | 1,200,000 | |
Steel | 800,000 | |
Other Materials | 400,000 | |
Other Costs | 1,600,000 | |
Total Costs | 4,000,000 |
a. | 4,000,000 | |
b. | 3,950,000 | |
c. | 3,970,000 | |
d. | 4,750,000 | |
e. | 3,960,000 |
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