International Accounting
5th Edition
ISBN: 9781259747984
Author: Doupnik, Timothy S., Finn, Mark T., Gotti, Giorgio
Publisher: Mcgraw-hill Education,
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Textbook Question
Chapter 10, Problem 8EP
Fitzwater Limited (an Irish company) has a foreign subsidiary in Norway, 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 500,000 Norwegian kroner (NOK), and actual profit for the year was NOK 480,000. Fitzwater’s corporate management has calculated an unfavorable total
Required:
- a. Identify the combination of exchange rates (see Exhibit 10.10) used by Fitzwater’s corporate management in translating budgeted and actual amounts that results in the total budget variance of EUR 8,560.
- b. Determine the portion of the total budget variance calculated by Fitzwater’s corporate management that is caused by a change in the exchange rate between the EUR and the NOK. (There are three possible correct responses to this requirement.)
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($000 omitted)
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Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada.
The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted
income statement for the fiscal year ending June 30, 2022:
Lionel Corporation
Budgeted Income Statement
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($000 omitted)
Sales
$ 30,000
Cost of goods sold
$ 13,500
3,600
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Fixed
17,100
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2,400
8,700
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$ 4,200
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750
$ 3,450
1,035
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Income before income taxes
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Since the completion of the income statement, Lionel has learned that its sales agents are requiring a 5% increase in their commission
rate (to 23%) for the upcoming year. As a result, Lionel's president has decided to investigate the possibility of…
Lionel Corporation manufactures pharmaceutical products sold through a network of sales agents in the United States and Canada. The agents are currently paid an 18% commission on sales; that percentage was used when Lionel prepared the following budgeted income statement for the fiscal year ending June 30, 2019:
Lionel Corporation
Budgeted Income Statement
For the Year Ending June 30, 2019
($000 omitted)
Sales
$
29,100
Cost of goods sold
Variable
$
13,095
Fixed
3,492
16,587
Gross profit
$
12,513
Selling and administrative costs
Commissions
$
5,238
Fixed advertising cost
873
Fixed administrative cost
2,328
8,439
Operating income
$
4,074
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Chapter 10 Solutions
International Accounting
Ch. 10 - Prob. 1QCh. 10 - What makes calculation of NPV for a foreign...Ch. 10 - How does the evaluation of a potential foreign...Ch. 10 - Prob. 4QCh. 10 - How does an ethnocentric organizational structure...Ch. 10 - Prob. 6QCh. 10 - When might it be appropriate to evaluate the...Ch. 10 - Prob. 8QCh. 10 - Prob. 9QCh. 10 - How can a local currency operating budget and...
Ch. 10 - Prob. 11QCh. 10 - What is the advantage of using a projected future...Ch. 10 - Prob. 3EPCh. 10 - Prob. 4EPCh. 10 - Imogdi Corporation (a U.S-based company) has a...Ch. 10 - Philadelphia, Inc. (a Greek company) has a foreign...Ch. 10 - Fitzwater Limited (an Irish company) has a foreign...Ch. 10 - Prob. 9EPCh. 10 - Viking Corporation (a U.S.-based company) has a...Ch. 10 - Duncan Street Company (DSC), a British company, is...
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