Budget Variance for Individual Costs. Suzanne Stephens, manager of the Machining Department at the German subsidiary of

Question:

Budget Variance for Individual Costs. Suzanne Stephens, manager of the Machining Department at the German subsidiary of U. S.-based Mayfield Industries, has estimated overhead costs for August at an expected operating level of 6,000 machine hours as follows:

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\begin{tabular}{|c|c|}
\hline Lubrication & DM 3,900 \\
\hline Supplies . . . . . . . . . . . . . . . . . . . . . . . . . & 1,700 \\
\hline Power & 1,500 \\
\hline Repairs & 2,800 \\
\hline Maintenance . . . . . . . . . . . . . . . . . . . & $4,300 \quad$ \\
\hline Supervision . . . . . . . . . . . . . . . . . . . . . . . . & 4,0 \\
\hline Indirect labor... & $12,000 \quad$ \\
\hline Heat and light. & 3,2 \\
\hline Taxes and insurance. . . . . . . . . . . . . . . . . . & 1,400 \\
\hline Depreciation . . . . . . & 1,600 \\
\hline Total & DM 36,40 \\
\hline \end{tabular}
\section*{Required:}
1. Compare the actual overhead costs with a revised budget for 5,000 machine hours. Show budget variances for each item.
2. The budget comparison in Part (1) is translated into U. S. dollars for review by a corporate-level manager. Use the exchange rate of $\$ 0.50$ at the time the budget was approved for both the budget and the actual results to prepare a budget comparison.
3. Translate the budget at the $\$ 0.50$ rate and the actual at the end of period exchange rate of $\$ 0.55$. Prepare a budget comparison.
4. Comment on the comparison of results in Parts (2) and (3). What is the amount of foreign exchange gain or loss in the variances?