Answered step by step
Verified Expert Solution
Question
1 Approved Answer
.athways Challenge This Is Accounting! Economic Activity Variances are useful for comparing what actually happened to what was expected. But even more importantiy, variances help
.athways Challenge This Is Accounting! Economic Activity Variances are useful for comparing what actually happened to what was expected. But even more importantiy, variances help management understand My actual results were d'rlTerent from expectations. Multinational corporations such as Deere & Company (DE) are subject to exchange rate uctuations (changes). Exchange rates represent the price at which different currencies around the mud can be purchased. Exchange rates vary over time and can aect a company's operating income. Since Deere purchases goods and services using many cunencies around the world, changes in exchange rates affect its operating budgets and income. A key issue in analyzing and interpreting variances is controriabiiity. If a variance is controllable for a given employee, it means that the employee can exert etTort to inuence the size and direction of the variance. For example, a direct materials quantity variance may be controllable by the production supervisor, who may be able to take actions to decrease waste. Critical ThinkingiJudgment Assume a Brazilian purchasing agent for Deere purchases direct materials right atter the value of the Brazr'rr'an near (the currency of Brazil) declines. As a result, the purchasing agent spends more to purchase direct materials than budgeted. Should the purchasing agent be held accountable for the higher cost ofthe direct materials due to changes in the exchange rate
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started