Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows: Based on the above data, how much was the flexible budget variance for operating income?

Question

Onyx Company prepared a static budget at the beginning of the month. At the end of the month, the company is analyzing actual results versus budget using flexible budget methodology. Data are as follows:   Based on the above data, how much was the flexible budget variance for operating income?

Quizplus · Accepted Answer

Flexible Budget Variances: 
Revenue variance = actual revenue - flexible budget revenue = $29,500 - $28,050 = $1,450 F
Variable cost variance = actual variable cost - flexible budget variable cost = $17,500 - $17,640 = $140 U
Fixed cost variance = actual fixed cost - flexible budget fixed cost = $9,600 - $9,600 = $0
Flexible budget operating income = flexible budget revenue - flexible budget variable cost - flexible budget fixed cost = $28,050 - $17,640 - $9,600 = $580 F
Flexible budget variance for operating income = actual operating income - flexible budget operating income = $4,690 - $580 = $5,490 F. Therefore, the correct answer is D.

Onyx Company Prepared a Static Budget at the Beginning of the Month