Problem

At Ergonomics, Inc., each department’s expenses are reviewed monthly. A department can fai...

At Ergonomics, Inc., each department’s expenses are reviewed monthly. A department can fail to pass the budget variance test in a category if either (i) the absolute value of the difference between actual expenses and the budget is more than $500 or (ii) the absolute value of the difference between the actual expenses and the budget is more than 5% of the budgeted amount. Which of the following items fail the budget variance test? Explain your answers.

Item

Budgeted Expense ($)

Actual Expense ($)

Wages

220,750

221,239

Overtime

10,500

11,018

Shipping and Postage

530

589

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