Owens Technology Has a Product That Requires Raw Materials Purchased

Essay

Owens Technology has a product that requires raw materials purchased and produced at a Mexican subsidiary at a cost of 56 pesos, and is then sold to a European customer at a price of 6 euros. Last year, exchange rates stood at $0.092/peso and $1.26/euro and Owens' CEO commented that she was unhappy with the current dollar profit on this product. However, she knew that raising prices could be catastrophic to sales, so Owens embarked on an ambitious cost-cutting plan that dropped the cost of the materials and production to 48 pesos. Currently, exchange rates are $0.102/peso and $1.16/euro. What is the U.S. dollar profit on the product now?