K-Lane Industries, Inc., reported an unfavorable profit variance for its most recently concluded quarter. This implies that the company's:
A) Actual sales volume exceeded its static budgeted sales volume for the quarter.
B) Static budgeted sales volume exceeded its actual sales volume for the quarter.
C) Actual sales volume exceeded its flexible budget sales volume for the quarter.
D) Actual sales volume and static budgeted sales volume were equal for the quarter.

Question

Quizplus · Accepted Answer

An unfavorable profit variance occurs when actual profits are less than budgeted profits. This can happen when the actual sales volume is less than the static budgeted sales volume, as lower sales volumes typically lead to lower revenues and profits, assuming costs are as planned or higher.