BUSN 3200-001 Final Exam Tuesday, April 21, 2020 3:30 pm to

6:30 pm.
Unit 1: Question 1
Data:
Question 1  
FC/VC Bike Question 300298449
$
Fixed Cost Bike AUD 114,000.00
Variable Cost Bike AUD $ 207.50
Domestic Bike Sales (Units) 655
Domestic and Foreign Bike Sales (Units) 2190
  1535

Note: All dollar values in this question mean AUD.

We know that total cost of production = fixed cost + (quantity sold x variable cost per bike)

a) Domestic sales only: total cost = $ 114,000.00 + 655* $207.50 = $ 114,000.00 +$ 135,912.50
= $249,912.50
Cost per bike = $249,912.50/655 = $381.55.

b) Domestic + foreign sales: total cost = = $ 114,000.00 + 2190*$207.5 = $ 114,000.00 + $

454,425.00 = $ 568,425.00
Cost per bike = $ 568,425.00 / 2190 = $ 259.55.

From a) and b) it is evident that costing per bike is way less if we sell in both domestic and
foreign market. Therefore, Super Elliot should sell in both domestic and foreign market.

Unit 1: Question 4
Data:
Question 4  
FC/VC Bricklin Question 300298449
$
Fixed Cost Car CAD 59,500,000.00
Variable Cost Car CAD 44100
Domestic Sales (Units) 560
Domestic and Foreign Sales (Units) 1800
  1240

Note: All dollar values in this question mean CAD.

We know that total cost of production = fixed cost + (quantity sold x variable cost per bike)

a) Canadian sales only: total cost = $ 59,500,000.00 + 560*$ 44,100 = $ 59,500,000.00 + $

24,696,000.00 = $ 84,196,000.00
Cost per car = $ 84,196,000.00 / 560 = $ 150,350.00

Student Name: _____Aakash Tanwar______ Student Number:_300298449___________

 BUSN 3200-001 Final Exam Tuesday, April 21, 2020 3:30 pm to
6:30 pm.

b) Domestic + foreign sales. Total Cost: $ 59,500,000.00 + 1800* $ 44,100 = $ 59,500,000.00 + $

79,380,000.00 = $ 138,880,000.00.
Cost per vehicle= $ 138,880,000.00 / 1800 = $ 77,155.56.

From a) and b) it is evident that the costing per vehicle is far less if we were to sell in both
domestic and foreign market. Therefore, Bricklin should sell in both domestic and foreign
market.

Unit 2: Q 7: 7. How would you categorize the risk that COVID-19 has posed to global trade?
(Commercial risk? Country Risk? Currency risk? Other risk? etc.) Why?

Although COVID19 is a global phenomenon, I believe it’s a country risk. COVID19 is a multi-
country risk but a country risk, nonetheless. Here’s why:
 The magnitude of impact of COVID19 has varied country to country. While in Taiwan,
life has been running normally (with extra precautions), countries such as USA have
been left economically halted if not devastated.
 The timing of COVID19 has been different across countries. China began reopening its
factories when USA entered its worst phase of the pandemic.
 Response to COVID19 has been different across different countries in accordance to
their belief systems. While most people in South Korea complied with the government’s
dictate of lockdown, people in USA believe that their freedom has been compromised
due to issuance of mandatory lockdown dictates and are revolting on the streets of
Michigan as I write. Belief system (and the response due to it) forms a part of country
risk).
 Many countries have taken steps to protect their domestic industries by a) financially
supporting their domestic industries (USA has sanctioned support; Canada will let
qualified businesses claim up to 75% of their employee wages), and b) Protecting
domestic companies from hostile takeover (India has passed a law banning any foreign
direct investment from companies in which Chinese nationals have substantial stake).
 Countries have halted the movement of people and tried to contain unnecessary
movement by imposing curbs on public transit. Airlines have been stopped, so has the
movement of unnecessary cargo.
 Police have been helping businesses to ensure no mischief takes place. In Italy, Military
guards are stationed outside big grocery stores to prevent misadventures.

Basically, the situation and the actions taken by various governments fit the criteria of
COVID19 being a country risk.

Unit 3- Question 11

Student Name: _____Aakash Tanwar______ Student Number:_300298449___________

 BUSN 3200-001 Final Exam Tuesday, April 21, 2020 3:30 pm to
6:30 pm.
11. Which one (1) type of risk; commercial risk, country risk,
or foreign exchange (currency) risk, is the biggest challenge
for firms exporting FROM your home country? Why?

I believe country risk is the biggest risk exporters might face if they were to export from India.
 People are very religiously inclined (have strong belief systems) and are easily
manipulated by the politicians when their sentiments are appealed. For instance, India is
the one of the largest exporters of beef in the world. However, all of it is buffalo meat. If
any exporter were to think about exporting cow meat, all hell would break loose (since
cow is considered sacred).
 The government is very protective of its domestic industries. High degree of subsidies is
provided in the agriculture sector to keep the prices of the produce produced by small
farmers globally competitive. The government doesn’t allow foreign e-commerce
companies to keep their own inventory to protect the domestic players.
 The bureaucracy is rigid and getting clearances and approvals for business/ exports can
be a tardy process. Bribes are prevalent, even customs officials create hindrances till
they are not paid off (My dad worked for 5 years at an international airport in India; I
know what I’m talking about). (Things have improved, but still a long way to go).
 Agitation of people for various reasons is quite common. How bad it can be realized
from the case of Sterlite copper plant in Tamil Nadu. The plant was shut down after
people agitated against it for months (reason being misinformation and rumors). The
shutting down led to country becoming net importer of copper from a net exporter.
 High degree of religious and political ideology conflicts has resulted in the downfall of
industries in many states (Bengal, Kerala the prime examples). Naturally, exporters
based in these states have their business tumble.

Interestingly, the states that are doing good in terms of business do exceptionally well, and the
ones that do badly continue to perform even worse.

For to everyone who has will more be given, and he will have abundance; but from him who has
not, even what he has will be taken away.

— Matthew 25:29, RSV.

Student Name: _____Aakash Tanwar______ Student Number:_300298449___________

 BUSN 3200-001 Final Exam Tuesday, April 21, 2020 3:30 pm to
6:30 pm.

Unit 4: Question 17

Data

Question 17 300298449
Original Cost CAD $ 145.50
Original Retail CAD $ 280.50
New Cost CAD $ 200.00
New Retail CAD $ 382.50

Margin = (Selling price – cost)/ Selling price.

a) Margin with original cost and original retail (selling price):

= (280.50 – 145.50)/ 280.50 = 135/ 280.50 = 48.13%

b) Margin with new cost and original retail (selling price):

= (280.50 – 200)/ 280.50 = 80.50/200 = 40.25%

c) Margin with new cost and new retail (selling price):

= (382.50 – 200)/ 382.50 = 182.50/ 382.50 = 47.71%

Unit 5: Question 20

The following information helps in dispute avoidance:

 Supplier style number: Supplier’s style number has been matched with buyer’s code
number. Supplier will be held accountable if there was a mess up in order.
 Quantity: Quantity of each item number and the total quantity has been specified. The
buyer expects the exact number of items to avoid any dispute in future.
 Shipment instruction: The PO mentions “Ship via”. The buyer can specify the mode of
transportation and the transporter (if there’s a preference). This removes the ambiguity
regarding shipment.
 Total Cost: The total cost is arguable the most important. It signifies the total money the
buyer is willing to give in exchange of the goods. Hopefully, the amounts are the same as
negotiated in the contract. If not, a dispute may happen/ PO correction may be required.
 Currency: In case of international transactions, it’s important to specify currency since
the currencies in both countries will be different. It would be chaotic if the seller is
expecting payment in USD and the buyer pays in Zimbabwean dollars (Just for
illustrative purpose. Lol!)
 Terms: I believe the terms refer to payment terms which signifies when the monetary
exchange would take place. This was noticed late but it’s worth mentioning given how
important it is.

Student Name: _____Aakash Tanwar______ Student Number:_300298449___________

 BUSN 3200-001 Final Exam Tuesday, April 21, 2020 3:30 pm to
6:30 pm.

CASE QUESTIONS:

Question 23:

By current circumstances, I believe we’re talking about the business disruption situation created
by COVID19.
I believe that right now, reducing payment risks is more important.
 The pandemic situation has disrupted business across the globe. This has led to
breakdown of supply chains and steep reduction of business activities. There is very less
production.
 While a supplier may have had excellent business relations with the buyer. The current
situation of either in unknown. The supplier doesn’t know whether the buyer is in
position to pay. The buyer, on the other hand, doesn’t know whether supplier has the
necessary resources to produce the given quantity of product and ship it on time. The
supplier is as wary about getting paid as the buyer is about getting the product(s).
 Payment facilitation tools such as Letter of Credit involve lot of paperwork and there is a
preference towards hard copy of documents that are examined manually. Banks are
concerned with the well being of their employees and want to adhere to social distancing
(not happening if the employees are called to work). This is leading to delays in the
process of obtaining L/C and document examination, putting the entire financial
transaction at the risk of collapsing.
 The parties would be concerned that the cargo would not be allowed to move
(government permit not granted), and in case it was not the case, there will be massive
delays at the port of entry. This is an even bigger concern if the goods are perishable. The
buyer would not want to pay for damaged/ spoiled product. The seller on the other hand
would expect full payment. Both parties will have to negotiate a dispute resolution
mechanism in case of such an eventuality.

A way out: For buyers and sellers that have a long business relationship. Transparency might
be the key. The supplier must provide hard evidence about its ability to fulfil the order. The
buyer must demonstrate presence of sufficient funds to pay the supplier and a legal affidavit
guaranteeing payment in case of proper shipment and fulfilment of all required obligations.

.
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Please scroll down

Question 25:

Student Name: _____Aakash Tanwar______ Student Number:_300298449___________

 BUSN 3200-001 Final Exam Tuesday, April 21, 2020 3:30 pm to
6:30 pm.

Advantages, if any do/does “hard-copy paper documentation” offer over “electronic trade
documents”

 For many commercial documents, there are limited number of copies that are required to
be made for documentation purposes. These are provided to various stakeholders
involved such as customs, banks etc. For instance, if triplicate copy of commercial
invoice is needed, one can be assured that no more than 3 copies (by copies I mean copies
that will be used for commercial purposes, not photostats) of that commercial invoice
exist. This may not be the case when it comes to electronic documents since even
unknowingly, one creates a new copy each time a mail is forwarded (technicalities!!)
 Any tampering on hard-copy documents can be easily caught. Same cannot be said for
the electronic counterparts.
 Hard copy documentations are not prone to getting hacked, attacked by viruses (in some
cases, all data is lost).
 Auditors will demand hard copies of all the trade related documentations (invoices,
transport bills etc.). They won’t trust the electronic documents for the same reason as
cited in point one (Which one is original?)
 Hard copies are not subject to disruptions such as unavailability of electricity or internet
(or both).

Bonus Question – 5 Marks

The UK Export Finance agency make the following statement on its website,
“Our mission is to ensure no viable UK export fails for lack of finance or
insurance, while operating at no net cost to the taxpayer.” ( Source:
https://www.gov.uk/government/collections/uk-export-finance-products-and-services)

What does this statement actually mean? How would the UK Export
Finance agency following this mission statement affect a UK
exporter?

The statement means that the UK export finance agency (UKEFA from here on) will do
everything in its capacity to ensure that a genuine export transaction will take place. Since all
export credit agencies operate on commercial terms (make some money!) The UKEFA too
generates capital to sustain its operations, thus not costing a shilling to the taxpayers. This is how
a UK exporter is affected:
 If there is a genuine buyer and the exporter is falling short of capital to manufacture the
product in question, UKEFA may provide loan guarantee to the bank the exporter
approaches.
 The UKEFA will provide insurance to the exporter, meaning that it would cover the risk
of non-payment by the buyer. In this way, the UK exporter will not have to worry about
getting paid.
 The UKEFA may directly provide payments to the exporter’s suppliers in case the
exporter is short of funds to procure the necessary goods from the suppliers.

Student Name: _____Aakash Tanwar______ Student Number:_300298449___________

 BUSN 3200-001 Final Exam Tuesday, April 21, 2020 3:30 pm to
6:30 pm.
 The UKEFA will even arrange for loans for the buyer if there’s a shortage of capital on
the buyer’s end to purchase the UK based exporter’s product.

Thus, like any other export credit agency, the UKEFA will ensure it does whatever it takes to
push out UK’s exports in the global markets.

******

Student Name: _____Aakash Tanwar______ Student Number:_300298449___________