Peony Company

Peony Company has developed a static budget for the month of August, which is based on 9,000 direct labour hours. During the quarter, the actual activity was 10,000 direct labour hours. Data for August are summarized as follows:

	Static Budget (9,000 hours)	Actual Costs (10,000 hours)
Direct labour	$117,000	$120,000
Power (variable cost)	45,000	50,000
Salary of plant supervisor	5,000	5,000
TOTAL	$167,000	$175,000

Refer to Peony Company. What can be concluded when comparing the static budget to the actual costs?

	The salary of the plant supervisor is fixed.
	Immediate action is needed to reduce costs.
	The plant manager was clearly not efficient.
	The manager spent more than should have been spent.