The Following Regression Model Was Run by a U

question 27

Multiple Choice

The following regression model was run by a U.S.-based MNC to determine its degree of economic exposure as it relates to the Australian dollar and Sudanese dinar (SDD) :
where the term on the leFt-hand side is the percentage change in inflation-adjusted cash flows measured in the firm's home currency over period t, and et is the percentage change in the exchange rate of the currency over period t. The regression was run over two subperiods for each of the two currencies, with the following results:
Based on these results, which of the following statements is probably not true?

• A)The MNC was more sensitive to movements in the Australian dollar than in the dinar in the earlier subperiod.
• B)The MNC was more sensitive to movements in the dinar than in the Australian dollar in the more recent subperiod.
• C)The MNC probably had more outflows than inflows in Australian dollars in the earlier subperiod.
• D)The MNC probably had more inflows than outflows denominated in dinar in the more recent subperiod.
• E)All of the above are true.

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Definitions:

Materials Quantity Variance

The variance between the real amount of materials utilized in manufacturing and the anticipated standard amount, times the standard unit cost.

Overhead Variance

The difference between the actual overhead costs incurred and the standard or expected overhead costs.

Direct Materials Price Variance

Direct materials price variance is the difference between the actual cost of direct materials and the standard cost, showing how much more or less was spent on purchasing materials.

Direct Labor Quantity Variance

The difference between the actual hours worked and the standard hours allowed, multiplied by the standard rate, indicating efficiency in labor usage.