Answer the following questions using the information below:
Contrafic Corporation 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.
$$\begin{array} { l r r }
& \underline { \text { Actual } } & \text { Budgeted } \
\text { Units sold }& 180,000 \text { units } & 185,000 \text { units } \
\text { Variable costs } & \$ 1,080,000 & \$ 1,295,000 \
\text { Fixed costs }&\$ 800,000 & \$ 775,000
\end{array}$$
-What is the static-budget variance of operating income?
A) $85,000 favorable
B) $90,000 unfavorable
C) $110,000 favorable
D) $105,000 unfavorable

Question

Answer the following questions using the information below:
Contrafic Corporation 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.
 $$\begin{array} { l r r } 
 & \underline { \text { Actual } } & \text { Budgeted } \
\text { Units sold }& 180,000 \text { units } & 185,000 \text { units } \
\text { Variable costs }  & \$ 1,080,000 & \$ 1,295,000 \
\text { Fixed costs }&\$ 800,000 & \$ 775,000
\end{array}$$
-What is the static-budget variance of operating income?
A) $85,000 favorable
B) $90,000 unfavorable
C) $110,000 favorable
D) $105,000 unfavorable

Quizplus · Accepted Answer

The static-budget variance of operating income is the difference between the actual operating income and the budgeted operating income. The actual operating income is calculated as follows:Actual operating income = (Actual units sold * Actual selling price per unit) - (Actual variable costs + Actual fixed costs)Actual operating income = (180,000 units * $21 per unit) - ($1,080,000 + $800,000)Actual operating income = $3,780,000 - $1,880,000Actual operating income = $1,900,000The budgeted operating income is calculated as follows:Budgeted operating income = (Budgeted units sold * Budgeted selling price per unit) - (Budgeted variable costs + Budgeted fixed costs)Budgeted operating income = (185,000 units * $21 per unit) - ($1,295,000 + $775,000)Budgeted operating income = $3,885,000 - $2,070,000Budgeted operating income = $1,815,000The static-budget variance of operating income is calculated as follows:Static-budget variance of operating income = Actual operating income - Budgeted operating incomeStatic-budget variance of operating income = $1,900,000 - $1,815,000Static-budget variance of operating income = $85,000 favorable

Answer the Following Questions Using the Information Below: Contrafic Corporation

Answer the Following Questions Using the Information Below:
Contrafic Corporation