Answer the following questions using the information below: ABC Corp. used the f
ID: 2558337 • Letter: A
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
Explanation / Answer
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