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# How to calculate the exchange cost ?What is the cost of exchange?

What is the cost of exchange?

The cost of exchange refers to how much the cost of the national currency (RMB) is required for the return of an export commodity to a unit of foreign exchange. In other words, the “total cost of exports” of RMB can be exchanged back to the “net income foreign exchange” of unit foreign currencies. Exchange costs are controlled at 5 to 8 , such as exchange costs higher than the bank’s foreign exchange licence price, exports are losses, and vice versa are profitable.

How to calculate the exchange cost ?

The calculation method of exchange cost: exchange cost = total export cost (RMB)/export net foreign exchange income (foreign currency), of which net foreign exchange income is FOB net income (net foreign exchange income after deducting labor expenses such as commissions, shipping premiums, etc.).

There is also a formula for calculating the cost of exchange: the cost of exchange= the taxed price of the purchased goods, (1 + the statutory tax rate – the export tax rebate rate) / the export FOB price. For example: the cost of exchange=the taxed price of the purchased goods, or the export FOB price.

The total cost of RMB includes: the cost of transportation of purchased goods, insurance premiums, bank charges, comprehensive capital, etc., and the total RMB expenditure after the amount of the export tax rebate (if the export commodity is a tax refund subsidized commodity).

As can be seen from the formula, the cost of exchange is proportional to the total cost of exports and inversely proportional to net foreign exchange income. Based on this formula, exchange costs are often used to assess the operating results of export commodities, the main role is:

(1) The comparison of the cost of exchange of different types of export commodities is used as one of the bases for adjusting the structure of export commodities and ̈ turning a profit and loss”.

(2) The same kind of export commodities, compare the cost of exchange exported to different countries and regions, as one of the basis for selecting export markets

(3) Compare the exchange costs of different regions and companies, export the same kind of goods, find gaps, tap potential, improve management.

(4) The same kind of export commodities, compare the cost of exchange in the same period of different periods, in order to compare the increase or decrease of exchange costs.

Post time: Jun-10-2021