Plas-Tex Exporting (Scenario)
Plas-Tex Plastic Company manufactures plastic storage containers of all different sizes. Plas-Tex has been exporting more storage containers to Europe recently because of the depreciation of the U.S. dollar relative to the euro. Plas-Tex CEO, Wayne Chisholm, has prepared a report for the annual shareholders meeting in which he outlines his manufacturing and sales recommendations for the upcoming year.
-Which of the following should be considered closely before Chisholm recommends increasing production to take advantage of the current exchange rate?
A) What is the expected outcome of Plas-Tex negotiations with an Asian manufacturer?
B) How much revenue did Plas-Tex generate from European sales last year?
C) What will be the effect on Plas-Tex if the euro depreciates more than the U.S. dollar?
D) What has been the historic impact of capital flight on Plas-Tex revenues?

Question

Quizplus · Accepted Answer

C is correct because if the euro depreciates more than the U.S. dollar, it could negatively affect Plas-Tex's revenue from European sales, making it crucial to consider before increasing production based on the current exchange rate.

Plas-Tex Exporting (Scenario) Plas-Tex Plastic Company Manufactures Plastic Storage Containers of All Different