{item's Dropdown} evaluates to a string in the form <id>:<dropdown_value> example: 3:yellow
SEARCH("yellow", "3:yellow"): Searches for "yellow" in the provided string. Returns the starting position of the substring if found. Throws an error if the substring is not found.
IFERROR(..., 0): Catches the error thrown by SEARCH when "yellow" is not found. Returns 0 instead of throwing an error.
IF(... > 0, 1, 0): Checks if the position returned by SEARCH is greater than 0 (indicating that "yellow" was found). Returns 1 if "yellow" exists; otherwise, it returns 0.
Let me know if that works for you.
Disclaimer:
I’m one of the developers of Formula PRO.