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 flexible budget variance for fixed 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 flexible budget variance for fixed expenses?

Quizplus · Accepted Answer

The flexible budget variance for fixed expenses is the difference between the actual fixed expenses and the budgeted fixed expenses. In this case, actual fixed expenses are $225,000 and budgeted fixed expenses are $200,000, so the variance is $25,000 unfavorable. This means that actual fixed expenses were higher than budgeted fixed expenses, which could be due to an increase in fixed costs.

The Carolina Products Company Has Just Completed a Flexible Budget