Answer Happy

Acuña Leather Goods.  DeMagistris Fashion​ Company, based
in New York​ City, imports leather coats from​ Acuña
Leather​ Goods, a reliable and longtime​ supplier, based
in Buenos​ Aires, Argentina. Payment is in Argentine pesos.
When the peso lost its parity with the U.S. dollar in
January​ 2002, it collapsed in value to
Ps4.0​/$
by October 2002. The outlook was for a further decline in
the​ peso's value. Since both DeMagistris and​ Acuña
wanted to continue their longtime​ relationship, they agreed
on a​ risk-sharing arrangement. As long as the spot rate on
the date of an invoice is between​ Ps3.5/$ and​ Ps4.5/$,
DeMagistris will pay based on the spot rate. If the exchange rate
falls outside this​ range, they will share the difference
equally with​ Acuña Leather Goods. The​ risk-sharing
agreement will last for six​ months, at which time the
exchange rate limits will be reevaluated. DeMagistris contracts to
import leather coats from​ Acuña for
Ps8,000,000
or
$2,000,000
at the current spot rate of
Ps4.0​/$
during the next six months.
a. If the exchange rate changes immediately to
Ps6.0​/$,
what will be the dollar cost of six months of imports
to​ DeMagistris?
b. At
Ps6.0​/$,
what will be the peso export sales of​ Acuña Leather Goods
to DeMagistris Fashion​ Company?