The static-budget variance will be favorable when:
A)actual unit sales are less than budgeted unit sales
B)the actual contribution margin is greater than the static-budget contribution margin
C)the actual sales mix shifts toward the less profitable units
D)the composite unit for the actual mix is greater than for the budgeted mix

Question

Quizplus · Accepted Answer

Static-budget variance measures the difference between actual results and the budgeted amounts based on the original assumptions. If the actual contribution margin is greater than the static-budget contribution margin, the static-budget variance will be favorable because it indicates that the company is generating more profit than expected. A is incorrect because if actual unit sales are less than budgeted unit sales, it will result in an unfavorable static-budget variance. C is incorrect because when the actual sales mix shifts toward the less profitable units, the static-budget variance will be unfavorable. D is incorrect because if the composite unit for the actual mix is greater than for the budgeted mix, it will result in an unfavorable static-budget variance.

The Static-Budget Variance Will Be Favorable When