What is the import fee

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Question - X is a fashion company based in Bali, Indonesia. X has a regular supplier of t-shirts located in Bangkok, Thailand, where the company has to pay for its purchases in Thai bath currency. In mid-2019, the bath currency has risen dramatically to IDR 458 / thai baht. As economic analysts predict an even higher rise in the value of the bath against the rupiah, both Thai exporters and X as importers decided to sign a six-month currency risk-sharing agreement. The agreement was made to set a functional exchange rate of between IDR 455 / thai baht and IDR 465 / thai baht. If the exchange rate at the time of issuance of the invoice is outside this range, then both parties will share the fair difference in the exchange rate. The two parties also agreed that the agreement would only last six months, after which it would be renegotiated. Over the next six months X buys the raw materials for shirts from a Thai importer for 500,000 thai baht or 230 million IDR at an exchange rate of 460 IDR / thai baht.

a. If the exchange rate drops to IDR 484 / thai baht, what is the import fee (in rupiah) that X will have to bear during these six months to the Thai importer?

b. What is the sales volume of Thai exporters (in baths) to X at an exchange rate of IDR 484 / thai baht?

c. If the exchange rate drops to IDR 440 / thai baht, what is the import fee (in rupiah) that X will have to bear during these six months to the Thai importer?

d. What is the sales volume of Thai exporters (in baths) to X at an exchange rate of IDR 440 / thai baht?

Reference no: EM132933008

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