level of activity ILLUSTRATION 11.6 Visual summary of static budgets A static budget report is, therefore, appropriate for fixed manufacturing costs and for fixed selling and administrative expenses. But, as you will see shortly, static budget reports may not be a proper basis for evaluating a manager's performance in controlling variable costs. DO IT! 1 Static Budget Reports Lawler Company expects to produce 5,000 units of product CV93 during the current month. Budgeted variable manufacturing costs per unit are direct materials $6, direct labour $15, and overhead $24. Monthly budgeted fixed manufacturing overhead costs are $10,000 for depreciation and $5,000 for supervision. In the current month, Lawler produced 5,500 units and incurred the following costs: direct materials $33,900, direct labour $74,200, variable overhead $120,500, depreciation $10,000, and supervision $5,000. Prepare a static budget report. (Hint: The Budget column is based on estimated production of 5,000 units while the Actual column is the actual costs incurred during the period.) Were costs controlled? Discuss limitations of this budget. ACTION PLAN Classify each cost as variable or fixed. Determine the difference as favourable or unfavourable. Determine the difference in total variable costs, total fixed costs, and total costs. . OM