16. the following table, the variances on sales was, Stabic Bodget Fleuble Budge

Question

16. the following table, the variances on sales was, Stabic Bodget Fleuble Budget Varimce 8000 Number of unuts Sales RevEnme Mateials Labor Overhead 10,000 $300,000 $240,000 $100,000$80,000 $. 50.000$40,000 .50,000 $50,000 a Unfavorable b. Favorable c. No vaniances d. All statements are false. 17 Using the same table. For materials, labor and overhead costs, the variances was a. Unfavorable b. Favorable c. No variances d. All statements are false. 18. The Residual Income a. The operating income divided by the operating assets. b. The target of the sales department c. Encourages managers to make profitability that would rejected using ROL d The operating income less operating assets

Explanation / Answer

16) The variances on sales was unfavorable because the actual units sold are less than budgeted units to be sold (i.e. 8,000 units are less than 10,000 units). Therefore as a result of it, the sales revenue has decreased from $300,000 in static budget to $240,000 in flexible budget.

Therefore the correct option is a) Unfavorable.

17) The per unit cost of material remains same and not changed (i.e. $100,000/10,000 = $10 and $80,000/8,000 = $10), similarly the per unit cost of labor remains same (i.e. $50,000/10,000 = $5 and $40,000/8,000 = $5), the overhead cost is fixed at $50,000 and not changed. Therefore there is no variances for material, labor and overhead costs.

Therefore the correct option is c) No variances

18) Residual income is calculated by deducting minimum return on capital from operating income. The residual income encourages mangers to make profitability that would be rejected using ROI. It is one of the main advantages of Residual income.

Therefore the correct option is c)

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