Element 1 - Exchange rates, real exchange rates, landed cost real exchange rates and rates at which business moves

You are working in the sales department of an SME which is a significant supplier of Yokibuses to the Finnish market. Your company has a turnover of 5 million which is about 5% of the Finnish market of 100 million. You supply retailers throughout Finland.

The following are some facts about your product and the makeup of its cost per unit at present production levels as at 1st March 2021

Fixed costs 0,27

Variable costs 0,83

Labour 0,60

Cocoa 0,20 (100 grms)

Other 0,03

Total Unit Cost 1,10

Sales Price 1,20

The product is light and travels well

All points within Eurasia - add 5% for additional packaging and transport costs

All points in Americas, East Asia and Australia add 10% for additional packaging and transport costs.

Everyone loves Yokibuses and there are no customs issues with them anywhere in the world.

Work out the

1. Real exchange rate

2. Real exchange rate at landed cost

3. Real exchange rate at landed cost plus a 5% discount to local buyers

For a currency market of your choice - state date and nominal exchange rate used.

Set the local currency price for the market at a level that you compete at level 3.