The Carolina Products Company has just completed a flexible budget analysis of 2 nd quarter operating income, as shown here:

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Based on the above data, which of the following statements would be a correct interpretation of the sales volume variance for variable expenses?

Question

The Carolina Products Company has just completed a flexible budget analysis of 2 nd quarter operating income, as shown here:

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Based on the above data, which of the following statements would be a correct interpretation of the sales volume variance for variable expenses?

Quizplus · Accepted Answer

The sales volume variance for variable expenses is calculated by comparing the budgeted variable expenses for the actual sales volume to the flexible budget variable expenses for the actual sales volume. The flexible budget assumes an increase in variable expenses with an increase in sales volume. Therefore, if the actual variable expenses are higher than the flexible budget variable expenses, it is likely due to an increase in sales volume. Thus, the correct interpretation of the sales volume variance for variable expenses would be an increase in sales volume.

The Carolina Products Company Has Just Completed a Flexible Budget