Answer:
Initial exchange rate Variance = $1 820 000
Ending exchange rate Variance = $1 320 000
Explanation:
In order to find the variance between the budgeted and the actual profits we have to find the Budgeted Profits and the Actual profits
Budgeted profits = budgeted revenue - budgeted expenses
=40 000 000 - 30 000 000
=10 000 000
Actual profits = actual revenue - actual expenses
= 50 000 000 - 42 000 000
= 8 000 000
These profits are in Argentina pesos and we have to convert to USD
at the beginning of the budget the exchange rate USD 0.63 per ARS for budgeted and 0.56 in actual
Budgeted profit = 10 000 000 * 0.63 = $6 300 000
Actual Profit = 8 000 000 * 0.56 = $4 480 000
Total budget Variance in USD = 6 300 000 - 4 480 000 = $1 820 000
At year end exchange for the rate for the budgeted USD 0.58 per ARS
Budgeted profit = 10 000 000 * 0.58= $5 800 000
Actual Profit = 8 000 000 * 0.56 = $4 480 000
Total Budgeted Variance in USD = 5 800 000- 4 480 000 = $1 320 000
