The static budget, at the beginning of the month, for Bob's Deep Sea Fishing Company follows

Question

Static budget:
Sales volume: 2,000 units; Sales price: $50.00 per unit
Variable costs: $14.00 per unit; Fixed costs: $25,200 per month
Operating income: $46,800

Actual results, at the end of the month, follows:
Actual results:
Sales volume: 1,900 units; Sales price: $59.00 per unit
Variable costs: $16 per unit; Fixed costs: $34,300 per month
Operating income: $47,400

Calculate the flexible budget variance for operating income.
A) $3,600 U
B) $3,600 F
C) $4,200 F
D) $17,100 F

Answer 1

C .C)
Actual Results Flexible Budget Variance Flexible Budget Sales Volume Variance Static Budget
Units 1,900 0 1,900 100 U $2,000
Sales Revenue* $112,100 $17,100 F $95,000 $5,000 U $100,000
Variable Costs** 30,400 3,800 U 26,600 $1,400 F 28,000
Contribution Margin $81,700 $13,300 F $68,400 $3,600 U $72,000
Fixed Costs 34,300 9,100 U 25,200 $0 25,200
Operating Income/(Loss) $47,400 $4,200 F $43,200 $3,600 U $46,800

* Sales price per unit x Units
** Variable cost per unit x Units