Kelsey, Inc. produces plastic grocery bags. Kelsey has developed a static budget for the month of August, which is based on 8,000 direct labour hours. During the quarter, the actual activity was 9,000 direct labour hours. Data for August are summarized as follows:

-Refer to the Figure.Which of the following can be concluded when comparing the static budget to the actual costs?
A)The manager spent more than should have been spent.
B)Immediate action is needed to reduce costs.
C)The plant manager was clearly not efficient.
D)The salary of the plant supervisor is fixed.

Question

Kelsey, Inc. produces plastic grocery bags. Kelsey has developed a static budget for the month of August, which is based on 8,000 direct labour hours. During the quarter, the actual activity was 9,000 direct labour hours. Data for August are summarized as follows:
 
-Refer to the Figure.Which of the following can be concluded when comparing the static budget to the actual costs?
A)The manager spent more than should have been spent. 
B)Immediate action is needed to reduce costs. 
C)The plant manager was clearly not efficient. 
D)The salary of the plant supervisor is fixed.

Quizplus · Accepted Answer

The salary of the plant supervisor is typically a fixed cost, meaning it does not change with the level of production or sales, which can be concluded from comparing static budgets to actual costs.