Modeling a manufacturing business - FX related question

Hi guys,

So I am modeling a manufacturing business where FX plays an important role. Revenue is being driven by volumes and price. Home currency is NOK - only 3% of volumes are denominated in NOK, and the rest in GBP (9%), EUR (50%), AUD (23%) and USD (15%). The forecast is for the NOK to appreciate against all the aforementioned currencies during 2017. For FY 17, I forecast volumes to decrease about 3.3% yoy, and while underlying product price in Local currency is expected to increase, aggregate product price for the group in NOK is forecast to decrease also by 3.3% given the FX impact. In order to calculate the aggregate product price for the group, I start with the price achieved in FY 16, apply the underlying price growth assumption in LC, weighted by the volume currency split that has applied to it the forecast appreciation in the NOK against each currency.

Underlying variable costs which were 68.1% of revs in FY16 are forecast to increase to 68.5% in FY 17. However, on the cost side the cost structure currency split is NOK (37%), EUR (36%) and AUD (27%). I similarly apply weights to calculate the variable costs for the group, taking account of the forecast FX impact where applicable.

So, for FY 17 I have revenues decreasing around 6.0% while variable costs decrease at a faster rate, of 7.6%.

The group has only 3% of volumes but 37% of variable costs denominated in NOK. My question is, intuitively I am thinking that given the Company's natural short NOK position, an appreciation in NOK should result in a compression of contribution margin, especially since I also assumed a 40bps increase in underlying variable costs (pre-FX.) Is that correct? The fact that I get an increase in margin, does it point to a bug in the model?

Welcome any thoughts, thanks people.