Farmers Insurance Company had a static budgeted operating income of $8.6 million.Actual operating income was $6.4 million.What is the static-budget variance of operating income?
A)$2.2 million Favorable
B)$2.2 million Unfavorable
C)$6.4 million Favorable
D)$8.6 million Unfavorable

Question

Quizplus · Accepted Answer

The static-budget variance formula is Actual operating income - Budgeted operating income.
So, the static-budget variance of operating income is: 
$6.4 million - $8.6 million = -$2.2 million. 
Since the actual operating income is lower than budgeted operating income, it is unfavorable. Therefore, the correct answer is B) $2.2 million Unfavorable.

Farmers Insurance Company Had a Static Budgeted Operating Income of $8.6