In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 was fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution margin, $27,000U.

The total amount of variable costs in the flexible budget for September, to the nearest dollar, was:
A) $129,000.
B) $192,000.
C) $200,000.
D) $208,000.
E) $255,000.

Question

In September, Larson Inc. sold 40,000 units of its only product for $240,000 and incurred a total cost of $225,000, of which $25,000 was fixed costs. The flexible budget for September showed total sales of $300,000. Among variances of the period were: total variable cost flexible-budget variance, $8,000U; total flexible-budget variance, $63,000U; and, sales volume variance, in terms of contribution margin, $27,000U.

The total amount of variable costs in the flexible budget for September, to the nearest dollar, was:

The total amount of variable costs in the flexible budget for September, to the nearest dollar, was:
A) $129,000.
B) $192,000.
C) $200,000.
D) $208,000.
E) $255,000.

Quizplus · Accepted Answer

The total variable cost in the flexible budget can be calculated by starting with the actual total cost and adjusting for the given variances. The actual total cost is $225,000, of which $25,000 is fixed, leaving $200,000 as the actual variable cost. The variable cost flexible-budget variance is $8,000 unfavorable (U), which means the flexible budget variable costs were $8,000 less than the actual variable costs. Therefore, the variable costs in the flexible budget were $200,000 - $8,000 = $192,000.