The Vs. Static Budgeting

1268 Words Sep 20th, 2016 6 Pages
When we compare the static budget with the actual results, there has been a decrease of 2000 cart rentals, which cause $50,000 unfavorable variance. Moreover, there is an unfavorable variance of $200 from the static budget and this is due to the increase in the Labor cost. But when it comes to the gas and oil there has been a decrease, which cause $1100 favorable variance. So the difference between the actual operating profits and the static budgeting for April is $49100 ($50,000U + $200U - $1100F). In my opinion almost of all the differences between the actual operating profits and the static budgeting for April is due to the reduced cart rentals from 6000 to 4000. When we compare the flexible budget with the actual results, there is an unfavorable variance of $200, this is due to the increase in the Labor cost and also there is an unfavorable variance of $900 from the flexible budget and this is because gas and oil were over the budget. In the case of flexible budget, labor, gas and oil were over the budget which cause unfavorable variance of $1100 ($200 + $900). The $200 unfavorable variance in labor is probably insignificant and the $900 gas and oil difference is likely a timing difference between when the gas and oil are purchased and when they are actually used.

b.
Advantages
• More accurate when compare to the static budget
• It is easy to control the costs and easy to evaluate the profits.
• Can make adjustments for the predictions
• Easy to adapt to the…

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