Global Engineering's actual operating income for the current year is $55,000. The flexible budget operating income for actual sales volume is $48,000, while the static budget operating income is $53,000. What is the sales volume variance for operating income?
A)$5,000 favorable
B)$2,000 unfavorable
C)$5,000 unfavorable
D)$2,000 favorable

Question

Quizplus · Accepted Answer

Sales Volume Variance = Actual Operating Income - Flexible Budget Operating Income

Sales Volume Variance = $55,000 - $48,000 = $7,000 unfavorable

To determine if the sales volume variance is favorable or unfavorable, we compare the actual operating income to the flexible budget operating income. In this case, the actual operating income of $55,000 is higher than the flexible budget operating income of $48,000, indicating a favorable variance. However, the question asks for the sales volume variance, which is calculated by subtracting the flexible budget operating income from the actual operating income. Therefore, the sales volume variance is $7,000 unfavorable.

Therefore, the correct answer is C.

Global Engineering's Actual Operating Income for the Current Year Is