Question

Answer the following questions using the information below:

ABC Corp. used the following data to evaluate its current operating system.

The company sells items for $21 each and used a budgeted selling price of $21 per unit.

                                                                   Actual             Budgeted

        Units sold                           180,000 units      185,000 units

        Variable costs                         $1,080,000           $1,295,000

        Fixed costs                                 $ 800,000              $ 775,000

1) What is the static-budget variance of revenues?

A) $105,000 favorable

B) $105,000 unfavorable

C) $8,000 favorable

D) $8,000 unfavorable

2) What is the static-budget variance of variable costs?

A) $25,000 favorable

B) $25,000 unfavorable

C) $215,000 favorable

D) $215,000 unfavorable

PLEASE SPECIFY WHY THEY ARE UNFAVORABLE AND FAVORABLE

Answer 1

1

Actual units

180000

Budgeted units

185000

Sale Per unit

$21

Static budget Variance of Revenues

= (Actual units x sale per unit) - (Budgeted units x Sales per unit)

= (180000 x 21) - (185000 x 21)

=

(105,000)

Unfavorable

Option B is Correct

In this Problem, Actual units is lesser than Budgeted units. Thus, it may lead to Unfavorable variance to the company

2

Actual Variable Costs

$1,080,000

Budgeted Variable Costs

$1,295,000

Static budget Variance of Variable Costs

= Actual Variable costs - Budgeted Variable Costs

=

$215,000

Favorable

Option C is Correct

In this Problem, Actual Variable Cost is lesser than Budgeted Variable Costs. hence, it may lead to favorable variance to the company

1 Actual units 180000 Budgeted units 185000 Sale Per unit $21 Static budget Variance of Revenues = (Actual units x sale per unit) - (Budgeted units x Sales per unit) = (180000 x 21) - (185000 x 21) =      (105,000) Unfavorable Option B is Correct In this Problem, Actual units is lesser than Budgeted units. Thus, it may lead to Unfavorable variance to the company 2 Actual Variable Costs $1,080,000 Budgeted Variable Costs $1,295,000 Static budget Variance of Variable Costs = Actual Variable costs - Budgeted Variable Costs = $215,000 Favorable Option C is Correct In this Problem, Actual Variable Cost is lesser than Budgeted Variable Costs. hence, it may lead to favorable variance to the company