The Carolina Products Company has just completed a flexible budget analysis of 2^nd quarter operating income, as shown here: Based on the above data, which of the following statements would be a correct interpretation of the sales volume variance for variable expenses?

Question

Quizplus · Accepted Answer

The sales volume variance for variable expenses measures the deviation between actual variable expenses and the flexible budget amount for the actual sales volume. If the actual sales volume is greater than the flexible budget sales volume, there should be a favorable sales volume variance for variable expenses. This means that the company has sold more units than planned, resulting in higher revenue and possibly lower unit costs due to economies of scale. Therefore, the correct interpretation of the sales volume variance for variable expenses is an increase in sales volume.

The Carolina Products Company Has Just Completed a Flexible Budget