Question

Daniels Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and had used a budgeted selling price of $19 per unit. Actual BudgetedUnits sold 280,000 units 278,000 unitsVariable costs $960,000 $886,000Fixed costs $60,000 $51,000 What is the static-budget variance of operating income?

Answer 1

The correct answer is $325,000 (unfavorable).

Step-by-step explanation:

According to the scenario, computation of the given data are as follow:-

Sales = Selling price per unit × Sold unit

Actual Sales = $18 × 280,000 = $5,040,000

Budgeted sales = $19 × 278,000 = $5,282,000

Operating income = Actual sales - Variable cost - Fixed cost

Actual operating income= $5,040,000 - $960,000 - $60,000 = $4,020,000

Budgeted operating income = $5,282,000 - $886,000 - $51,000 = $4,345,000

Static budget variance of operating income = Actual Operating Income -Budgeted Operating Income

= $4,020,000 - $4,345,000

= $325,000 (unfavorable)