Potter Company has the following information:
$\begin{array}{ll}
\text { Actual operating loss at 5,000 units } & \$(11,000) \
\text { Budgeted operating income at 5,000 units } & \$ 5,000 \
\text { Budgeted operating income at 10,000 units } & \$ 12,000 \
\text { Planned level of operations } & 10,000 \text { units } \
\text { Actual level of operations } & 5,000 \text { units }
\end{array}$
Assume the cost driver of product costs is units of production.What is the flexible budget variance for operating income?
A) $5,000 Unfavorable
B) $11,000 Unfavorable
C) $16,000 Unfavorable
D) $16,000 Favorable

Question

Quizplus · Accepted Answer

The flexible budget variance for operating income is calculated by comparing the actual results to what the budget would have been if it had been prepared for the actual level of activity. The budgeted operating income at 5,000 units was $5,000, but the actual operating loss was $(11,000). Therefore, the variance is $5,000 - (-$11,000) = $16,000 unfavorable.

Potter Company Has the Following Information Assume the Cost Driver of Product Costs Is Units of loss