Table 14.1.Hypothetical Costs of Producing an Automobile for Toyota Inc.of Japan

-Refer to Table 14.1.Assume that Toyota Inc.imports steel from U.S.suppliers,whose costs are denominated in dollars,while all other inputs are obtained from Japanese suppliers whose costs are denominated in yen.If the yen's exchange value appreciates from 200 yen = $1 to 100 yen = $1,the yen cost of a Toyota automobile equals:
A) 2,400,000 yen
B) 3,000,000 yen
C) 3,600,000 yen
D) 4,200,000 yen

Question

Table 14.1.Hypothetical Costs of Producing an Automobile for Toyota Inc.of Japan
 
-Refer to Table 14.1.Assume that Toyota Inc.imports steel from U.S.suppliers,whose costs are denominated in dollars,while all other inputs are obtained from Japanese suppliers whose costs are denominated in yen.If the yen's exchange value appreciates from 200 yen = $1 to 100 yen = $1,the yen cost of a Toyota automobile equals:
A) 2,400,000 yen 
B) 3,000,000 yen 
C) 3,600,000 yen 
D) 4,200,000 yen

Quizplus · Accepted Answer

To calculate the yen cost of a Toyota automobile, we need to convert the dollar cost of steel to yen using the current exchange rate of 100 yen = $1.

Steel cost = $500

Yen cost of steel = $500 x 100 = 50,000 yen

Total yen cost of automobile = (1,000,000 yen + 800,000 yen + 600,000 yen + 50,000 yen) x 3 = 3,600,000 yen.

Therefore, the correct choice is C.

Table 141Hypothetical Costs of Producing an Automobile for Toyota Inc