Question

All Kiwi Ltd (a New Zealand-based company) has a wholly-owned subsidiary in Malaysia whose manager is being evaluated on the basis of the variance between actual profit and budgeted profit in New Zealand dollars (NZD). Relevant information in Malaysian ringgit (MYR) for the current year is as follows: Budget Actual Revenues MYR 12,000,000 MYR 11,000,000 Expenses 9,000,000 9,000,000 Current year actual and projected exchange rates between the New Zealand dollar (NZD) and the Malaysian ringgit (MYR) are as follows: Actual at time of budget preparation NZD 0.312 per MYR 1 Projected ending at time of budget preparation NZD 0.340 per MYR 1 Actual at end of budget period NZD 0.357 per MYR 1 Required: Calculate the total budget variance for the current year using a projected exchange rate (projected at the time the budget is prepared).

Answer 1

Variance (Unfavorable) (NZD 340,000)

Step-by-step explanation:

Budget Variance using exchange rate projected at the time of budget

Budget Actual Variance Exc. Rate Variance in NZD

MYR MYR

Revenue 12000000 11000000 -1000000 0.34 -340000

Expenses 9000000 9000000 0 0.34 0

Profit 3000000 2000000 -1000000 0.34 -340000