The flexible budget variance:
A) directs management's attention to specific reasons for why budgeted income differed from actual income.
B) compares the static budget to the flexible budget.
C) removes any differences between budgeted operating income and actual income that are attributable to differences in budgeted and actual volume.
D) is most often used to determine whether or not there is sufficient demand for a company's product.

Question

Quizplus · Accepted Answer

The flexible budget variance removes any differences between the budgeted operating income and actual income that are attributable to differences in budgeted and actual volume. It helps management to isolate the reasons for why budgeted income differed from actual income. Option A is incorrect as it describes the purpose of the sales volume variance, not the flexible budget variance. Option B compares two types of budgets, not variances. Option D is incorrect as the flexible budget variance is not used to determine demand for a company's product.

The Flexible Budget Variance