A company is analyzing month-end results compared to both static and flexible budgets. This month the actual variable expenses per unit were lower than projected in the static budget. What kind of variance would that produce?

Question

Quizplus · Accepted Answer

A lower actual variable expense per unit than projected in the static budget would result in a favorable flexible budget variance for variable expenses. This is because the flexible budget adjusts to changes in volume and input prices, and therefore reflects a more accurate measure of what costs should have been for the level of activity achieved. A favorable variance means the actual costs were lower than what would have been expected based on the flexible budget.

A Company Is Analyzing Month-End Results Compared to Both Static