Conner Company has the following information:
$\begin{array}{ll}
\text { Actual operating loss at 5,000 units } & \$(11,000) \
\text { Budgeted operating income at 5,000 units } & \$ 5,000 \
\text { Budgeted operating income at 10,000 units } & \$ 12,000 \
\text { Planned level of operations } & 10,000 \text { units } \
\text { Actual level of operations } & 5,000 \text { units }
\end{array}$
Assume units of output are the cost driver for product costs.What is the static budget variance for operating income?
A) $11,000 Unfavorable
B) $12,000 Unfavorable
C) $23,000 Unfavorable
D) $23,000 Favorable

Question

Quizplus · Accepted Answer

The static budget variance for operating income is calculated by comparing the actual results to the budgeted figures at the planned level of operations. Here, the planned level of operations was 10,000 units with a budgeted operating income of $12,000. However, the actual operating loss at the actual level of operations (5,000 units) was $11,000. The variance is calculated as the difference between the budgeted income at the planned level ($12,000) and the actual loss ($11,000), which equals $23,000 unfavorable. This is because the company performed worse than expected, resulting in a loss instead of the anticipated profit.

Conner Company Has the Following Information Assume Units of Output Are the Cost Driver for Product