The system calculates the cost of sales by using the inventory item’s Average Cost and multiplying it by the number of units on the sales invoice. The Profit Margin in the sales invoice value less the cost of sales.
E.g. if you sell 6 items for 50 each and the average cost is 30 then the sales value is 300 (6 x 50), the cost of sales is 180 (6 x 30) and the profit margin is 120 (300 - 180).
To see the default exchange rate being used, create a “Test” inventory item and then create a purchase invoice in the foreign currency for that item. Now go to that Inventory Item tab and look at the “Total Cost” value which will be in the local currency and calculate.
If you want to set /use a different exchange rate then go to Settings > Exchange Rates.
The Manager default exchange rates are only installed as a starting point and don’t necessarily represent current exchange rates.
PS - don’t forget to delete Test purchase invoice.