Dorffman Inc. has a $18,000 favorable flexible budget variance for May. Which of the following statements is true, if May's actual net operating income was $72,000?
A) Dorffman's static budget must have showed a net operating income of $54,000.
B) Dorffman's static budget must have showed a net operating income of $90,000.
C) Dorffman's flexible budget must have showed a net operating income of $54,000.
D) Dorffman's flexible budget must have showed a net operating income of $90,000.

Question

Quizplus · Accepted Answer

The flexible budget variance is the difference between the actual results and the flexible budget. If the variance is $18,000 favorable and the actual net operating income is $72,000, then the flexible budget must have shown a net operating income of $54,000 ($72,000 - $18,000).