Smith Corporation has a $6,000 favorable flexible budget variance for January. Which of the following statements is true, if January's flexible budget net operating income was $100,000?
A) Smith's static budget must have showed a net operating income of $106,000.
B) Smith's static budget must have showed a net operating income of $94,000.
C) Smith's actual net operating income must have been $106,000.
D) Smith's actual net operating income must have been $94,000.

Question

Quizplus · Accepted Answer

A favorable flexible budget variance indicates that the actual net operating income was higher than the flexible budget net operating income. Therefore, Smith's actual net operating income must have been $106,000 ($100,000 + $6,000).

Smith Corporation Has a $6,000 Favorable Flexible Budget Variance for January