Question

General Insurance Company had a static budgeted operating income of $4.6 million; however, actual income was $3.0 million. What is the static budget variance of operating income?

Select one:

a. $3,000,000 favourable

b. $1,600,000 favourable

c. 1,000,000 favourable

d. $1,600,000 unfavourable

Answer 1

Variance analysis is the analyzing the difference between budgeted data of cost, revenue and income with actual data. The Expected Level of performance will be estimated with the budgeted data. the realized date is the actual data. a variance may be favorable or unfavorable. If the actual Performance of the firm is better than the budget estimation favorable vice versa.

Static Budget variance of the operating income: It is a measure to find the variance between the actual operating income and budgeted Operating Income.

Static Budget variance of the operating income = Actual operating income - Budgeted Operating income

Static Budget variance of the operating income? =$3,000,000-$4,600,000 = $-1,600,000

since the Budgeted income is more than the actual income

Answer is : D. $1,600,000 Unfavourable