Western Outfitters Mountain Sports projected 2008 sales of 75,000 units at a unit sale price of $12.00. Actual 2008 sales were 72,000 units at $14.00 per unit. Actual variable costs, budgeted at $4.00 per unit, totaled $4.75 per unit. Budgeted fixed costs totaled $375,000 while actual fixed costs amounted to $400,000. What is the flexible budget variance for total expenses?

Question

Quizplus · Accepted Answer

The flexible budget variance for total expenses is calculated by comparing the actual expenses to the flexible budget expenses. The flexible budget would adjust the budgeted variable costs to the actual sales volume (72,000 units). The flexible budget expenses are: (72,000 units * $4.00) + $375,000 = $663,000. Actual expenses are: (72,000 units * $4.75) + $400,000 = $742,000. The variance is $742,000 - $663,000 = $79,000 unfavorable.

Western Outfitters Mountain Sports Projected 2008 Sales of 75,000 Units