You Are Hoarse from Explaining to Your Supervisor That the Cost

question 1

Multiple Choice

You are hoarse from explaining to your supervisor that the cost, if any, of hedging exchange-rate risk can be thought of as an insurance premium to avoid surprises.What is the cost of hedging a €2 million commitment if the spot rate is €1.6/$, the forward rate is €1.55/$, and the expected spot rate at the end of the hedge is €1.6/$?

• A)$0
• B)$25,000
• C)$40,323
• D)$68,966

---

Definitions:

Variable Overhead Rate Variance

The difference between the actual variable overhead incurred and the standard variable overhead allocated to produced goods, based on the standard variable overhead rate.

Direct Materials Purchases Variance

The difference between the actual cost of direct material purchases and the expected (or standard) cost, adjusted for volume purchased.

Standard Costs

Predetermined costs for materials, labor, and overhead used in budgeting and assessing performance.

Labor Efficiency Variance

A measure of the difference between the actual hours worked by employees and the standard hours expected to complete a task, used to assess labor productivity.