14) What is the static-budget variance of operating income? A) $238,000 favorable B) $238,000 unfavorable C) $235,000 favorable D) $235,000 unfavorable Answer: Explanation: B) ActualStatic Static-budgetResultsBudgetVarianceUnits sold280,000275,000Revenues$3,080,000$3,300,000$(220,000)UVariable costs900,000885,000(15,000)UContribution margin $2,180,000$2,415,000235,000Fixed costs55,00052,0003,000UOperating income$2,125,000$2,363,000$238,000U
Diff: 3Objective: 1AACSB: Application of knowledge15) Regier Company had planned for operating income of $10 million in the master budget but actually achieved operating income of only $7 million.
BDiff: 2Objective: 1AACSB: Analytical thinking16) A master budget is called a static budget because it is developed around a single planned output level.
Diff: 1Objective: 1AACSB: Analytical thinking17) When considered in isolation, a favorable variance decreases operating income relative to the budgeted amount.
Diff: 2Objective: 1AACSB: Application of knowledge6