Just Bags
Just Bags Produces Leather Purses -Refer to Just Bags

Just Bags
Just Bags produces leather purses. The company 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: $\begin{array}{lrr}&\underline{\text { Static budget }}&\underline{\text { Actual costs }}\\&\underline{(20,000 \text { hours }) } &\underline{(22,000 \text { hours }) }\\\text { Direct materials } & \$ 80,000 & \$ 87,000 \\\text { Direct labour } & 160,000 & 174,000 \\\text { Rent } &\underline{ 48,000} &\underline{ 50,000} \\\text { Total } & \underline{\$ 288,000} & \underline{\$ 311,000}\end{array}$

-Refer to Just Bags. What can be concluded when comparing the static budget to the actual outcomes?

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