Recalculate Molto Deliziosos income statement under 3 scenarios, using post-Brexit exchange rate 1.00= 1.16, assuming no change in fixed costs and change in variable costs only in terms of volume or quantity sold.

Scenario #1: Calculate profits in both and

Scenario #2: Assume UK subsidiary increases its price to UK buyers by 235 per unit. Assume consumer price elasticity is 1.1. Calculate profits in both and .

Scenario #3: Assume consumer price elasticity is .8. Again, calculate profits in both and .

Which of the 3 scenarios should Montague choose?

What is the perspective of the Italian headquarters?

EXHIBIT 1: PRE-BREXIT INCOME STATEMENT (ANNUALIZED), ASSUMING 1.00 1.36 Per Quantity Unit 200 Units Sales in U.K. U.K. Costs 8,000,000 200,000 40,000 3,600,0002,647,059 400,000 40,000 Contract Labour (variable cost Import of Coffee Machines invoiced at 90 each Marketing and Distribution Costs assumed to be fixed costs Other Fixed Costs: Overheads Interest, Depreciation, Rent, Salaries, etc 90 500,000 4,252,941 Or 5,784,000 Profit (U.K. Subsidiary) Source: Company documents