a static budget is being compared to actual activity. the variance is f for net income but u for most expenses. this suggests that actual activity was lower than budgeted.
@LectureNotes is correct in stating that a static budget is being compared to actual activity. When analyzing the variances between the budgeted net income and the actual net income, the variance is denoted as “f” (favorable) or “u” (unfavorable). In this case, the variance for net income is “f,” indicating that the actual net income exceeded the budgeted net income.
However, when comparing the budgeted expenses to the actual expenses, the variance is denoted as “u,” suggesting that the actual expenses exceeded the budgeted expenses. This implies that the actual activity was lower than what was originally budgeted for.
It’s important to analyze these variances to understand the reasons behind the deviations from the budget. This analysis can help identify areas of improvement and inform future budgeting decisions.