Answer the Following Questions Using the Information Below:
V8 Engineering

question 38

Multiple Choice

Answer the following questions using the information below:
V8 Engineering Pty used the following data to evaluate their current operating system.The company sells items for $14.50 each and had used a budgeted selling price of $15 per unit.
$$\begin{array} { l r r } & \text { Actual } & \text { Budgeted } \\\text { Units sold } & 206000 \text { units } & 200000 \text { units } \\\text { Variable costs } & \$ 965000 & \$ 950000 \\\text { Fixed costs } & \$ 53000 & \$ 50000\end{array}$$
-What is the static-budget variance of operating profit?

• A)$31 000 unfavourable
• B)$28 000 favourable
• C)$28 000 unfavourable
• D)$26 000 favourable

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Definitions:

Labour Efficiency Variance

The difference between the actual labor hours used and the standard labor hours expected to produce a certain level of output.

Standard Labour Rate

The predetermined or expected cost per unit of labor, used in budgeting and cost control.

Variable Overhead Efficiency Variance

The difference between the actual level of activity (direct labor-hours, machine-hours, or some other base) and the standard activity allowed, multiplied by the variable part of the predetermined overhead rate.

Direct Labour Hours

The total hours worked by employees directly involved in producing goods or delivering services, used to allocate labor costs accurately.