Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Armati, SA., had the following budgeted data:
The following actually occurred:
The static budget variance for direct materials is

A) £100 F.
B) £100 U.
C) £400 F.
D) £400 U.

Question

Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Armati, SA., had the following budgeted data:
The following actually occurred:
 The static budget variance for direct materials is

A) £100 F. 
B) £100 U. 
C) £400 F. 
D) £400 U.

Quizplus · Accepted Answer

To calculate the static budget variance (SBV) for direct materials, we use the formula:

SBV = Budgeted Quantity x (Budgeted Price - Actual Price)

SBV = 8,000 x (£5 - £7) = £(16,000) F

Therefore, the correct answer is C) £400 F, meaning the actual cost of direct materials exceeded the budgeted cost by £400.