Just Bags Produces Leather Purses -Refer to the Figure

question 8

Multiple Choice

Just Bags produces leather purses. Just Bags has developed a static budget for the first quarter, which is based on 20,000 direct labour hours. During the quarter, the actual activity was 22,000 direct labour hours. Data for the first quarter are summarized as follows:
$\begin{array}{lrr}&\text { Static budget } & \text { Actual costs } \\&(20,000 \text { hours }) & (22,000 \text { hours }) \\\text { Direct materials } & \$ 80,000 & \$ 87,000 \\\text { Direct labour } & 160,000 & 174,000 \\\text { Rent } & 48,000 & 50,000 \\\text { Total } & \$ 288,000 & \$ 311,000\end{array}$
-Refer to the Figure.Which of the following can be concluded when comparing the static budget to the actual outcomes?

• A)The manager had less direct labour hours.
• B)The variances are all unfavourable.
• C)The comparison is useful for assessing managerial efficiency.
• D)A static budget should be used for assessing efficiency.

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed.

Payback Period

The duration of time it takes to recoup the cost of an investment.

Straight-Line Method

A depreciation method that allocates the cost of an asset evenly over its useful life.

Gross Revenues

The total amount of sales revenue generated by a company before any deductions are made for returns, allowances, and discounts.