Question
Attica SA (a Greek company) has a foreign subsidiary in Morocco, whose manager is evaluated on the basis of profit in euros (EUR). In the
Attica SA (a Greek company) has a foreign subsidiary in Morocco, whose manager is evaluated on the basis of profit in euros (EUR). In the current year, the foreign subsidiary was budgeted to generate a profit of 1,000,000 Moroccan dirham (MAD), and actual profit for the year was MAD 1,050,000. Prometheuss corporate management has calculated an favorable total budget variance for the foreign subsidiary of EUR 7,650. Current year actual and projected exchange rates are as follows:
Actual exchange rate at time of budget preparation | EUR 0.086 per MAD 1 |
---|---|
Projected ending exchange rate at time of budget preparation | EUR 0.090 per MAD 1 |
Actual exchange rate at end of budget period | EUR 0.093 per MAD 1 |
Required:
Identify the combination of exchange rates (see Exhibit 10.10) used by Atticas corporate management in translating budget and actual amounts that results in the total budget variance of EUR 7,650.
Multiple Choice
Combination 1 - using the exchange rate that exists at the time the budget is prepared.
Combination 3 - using a projected exchange rate (projected at the time the budget is prepared).
Combination 4 - translating the budget at the initial exchange rate and translate actual results using the ending exchange rate
Combination 5 - translate budgeted profit using Projected at TOB exchange rate and translate actual profit using Actual at EOP exchange rate
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