In September, Larson Inc. sold 39,000 units of its only product for $234,000 and

Question

In September, Larson Inc. sold 39,000 units of its only product for $234,000 and incurred a total cost of $221,000, of which $25,000 is fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost flexible-budget variance, $7,800U; total flexible-budget variance, $63,100U; and, sales volume variance, in terms of contribution margin, $26,700U. The sales volume variance, in terms of operating income, is: A) $36,700 unfavorable B) $21,700 unfavorable C) $31,700 unfavorable D) $26,700 unfavorable E) $16,700 unfavorable In September, Larson Inc. sold 39,000 units of its only product for $234,000 and incurred a total cost of $221,000, of which $25,000 is fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost flexible-budget variance, $7,800U; total flexible-budget variance, $63,100U; and, sales volume variance, in terms of contribution margin, $26,700U. The sales volume variance, in terms of operating income, is: A) $36,700 unfavorable B) $21,700 unfavorable C) $31,700 unfavorable D) $26,700 unfavorable E) $16,700 unfavorable

Explanation / Answer

The Sales Volume VAriance , in terms of operating income is D) $26700 unfavourable because

Operating Income = sales -COGS-operating Expenses- Depreciation

which is equivalent to sales volume variance , in terms of Contribuiton margin.

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