A company has performed the following analysis for its operations PROFIT VARIANC

Question

A company has performed the following analysis for its operations PROFIT VARIANCE ANALYSIS REPORT Flexible Budget Variance Sales Volume Variance Actual Flexible Master Results Budget Budget Units Sold 20,000 20,000 5,000 U 25,000 Sales 120,000 137,500 Variable Cost 2,000 U 50,000 12,500 F 62,500 Cont. Margin 15,000 U 75,000 Fixed Cost 30,000 5,000 F 35,000 35,000 Operating Income 13,000 F 15,000 U $ 40,000 The flexible budget variance for contribution margin (F) should be Select one a. $22,000 U b. $ 8,000 F c. $12,000 F O d. $18,000 U

Explanation / Answer

Answer is $18,000 F.

Flexible Budget Operating Income = $13,000 F
Flexible Budget Fixed Cost = $5,000 F

Flexible Budget Operating Income = Flexible Budget Contribution Margin - Flexible Budget Fixed Costs
$13,000 F = Flexible Budget Contribution Margin - $5,000 F
Flexible Budget Contribution Margin = $18,000 F

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