Austen Educational Services had budgeted its training service charge at $100 per

Question

Austen Educational Services had budgeted its training service charge at $100 per hour. The company planned to provide 30,000 hours of training services during 2015. By lowering the service charge to $95 per hour, the company was able to increase the actual number of hours to 31,500.

Required

a.

Determine the sales volume variance and indicate the effect of the variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Volume Variance

Sales

Favorable

b.

Determine the flexible budget variance and indicate the effect of the variance by selecting favorable (F) or unfavorable (U). (Select "None" if there is no effect (i.e., zero variance).)

Flexible Budget Variance

Sales

Unfavorable

Austen Educational Services had budgeted its training service charge at $100 per hour. The company planned to provide 30,000 hours of training services during 2015. By lowering the service charge to $95 per hour, the company was able to increase the actual number of hours to 31,500.

Explanation / Answer

a)

Sales Volume Variance = (Actual Sales Units – Budgeted Sales Units) × Standard Unit Price

                                                = (31500- 30,000)x100

                                                = 150,000

Since Actual sales units greater than standard, it is a favorable variance.

b)

Static budget variance =(AQ x AP) – (SQ x SP)   

                                                = (31500 x 95) – ( 30000 x 100)

                                                = -7500

Flexible budget variance = Sales Volume Variance + Static budget variance

                                                = 150,000 -7500

                                                = 142,500 favorable

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