Question

Lincoln Corporation used the following data to evaluate their current operating system. The company sells items for $11 each and used a budgeted selling price of $11 per unit. Units sold Variable costs Fixed costs Actual 43,000 units $166,000 $38,000 Budgeted 37,000 units $156,000 $55,000 What is the static - budget variance of operating income? O A. $73,000 favorable O B. $56,000 unfavorable O c. $73,000 unfavorable OD. $56,000 favorable

Answer 1

Ans.	Option A     $73,000   favorable
	Lincoln Corporation
	Static Budget Performance Report
		Actual results	Static budget	Static Budget Variance
	Sales	$473,000	$407,000	$66,000	F
	Less: Variable cost	$166,000	$156,000	$10,000	U
	Contribution margin	$307,000	$251,000	$56,000	F
	Less: Fixed cost	$38,000	$55,000	$17,000	F
	Operating income	$269,000	$196,000	$73,000	F
	*Calculations :
	Total sales   = Units sold * Selling price
		Actual results	Static budget
	Total sales	43,000 * $11	37,000 * $11
	Static Budget Variance   =   Actual results - Static budget
	*Increase in costs from static budget to actual results =   Unfavorable.
	*Decrease in costs from static budget to actual results =   Favorable.
	*Increase in sales, contribution margin or net operating income from static budget to actual results =   Favorable.
	*Decrease in sales, contribution margin or net operating income from static budget to actual results =   Unfavorable.