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

Question

Quizplus · Accepted Answer

A lower actual fixed expense than projected in the static budget would result in a favorable flexible budget variance for fixed expenses. This is because the flexible budget adjusts for changes in actual activity levels, whereas the static budget assumes a fixed level of activity. Therefore, if the actual expenses are lower than projected in the static budget, the flexible budget will show a favorable variance because it will have adjusted for the lower activity level.

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