Business, 13.11.2019 07:31 sethjohnson386pbnm3x

Lew jewelry co. uses gold in the manufacture of its products. lew anticipates that it will need to purchase 500 ounces of gold in october 2017, for jewelry that will be shipped for the holiday shopping season. however, if the price of gold increases, lew's cost to produce its jewelry will increase, which would reduce its profit margins. to hedge the risk of increased gold prices, on april 1, 2017, lew enters into a gold futures contract and designates this futures contract as a cash flow hedge of the anticipated gold purchase. the notional amount of the contract is 500 ounces, and the terms of the contract give lew the right and the obligation to purchase gold at a price of $300 per ounce. the price will be good until the contract expires on october 31, 2017.

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