Question 2:

Answer the following questions: 1. Managers should be rewarded for every favorable variance and blame for every unfavorable variance. Do you agree? 2. Consider a company that plans to sell 1,000 units for $3 per unit. Budgeted variable costs are $2 per unit, budgeted fixed costs are $700 and static-budget profit is $300. Suppose the Company sells 800 units and income is $110. Compute and interpret the variance. 3. Suppose a company budgeted an operating profit of $100 on sales of $1,000. Actual sales were $900. The marketing department claimed that because sales were down 10%, it was responsible for only 10% of $100 or $10 of any drop in profit. Any further shortfall must be someone elses responsibility. Comment on this claim