Onyx Décor Company has prepared a static budget at the beginning of the month.At the end of the month,the following information has been retrieved from the records. Static budget:
Sales volume: 1,000 units: Price: $70 per unit
Variable expense: $32 per unit: Fixed expenses: $37,500 per month
Operating income: $500
Actual results:
Sales volume: 990 units: Price: $74 per unit
Variable expense: $35 per unit: Fixed expenses: $33,000 per month
Operating income: $5,610
Calculate the flexible budget variance for fixed expenses.

Question

Quizplus · Accepted Answer

Flexible budget for fixed expenses = Budgeted fixed expenses + (Actual sales units × (Budgeted fixed expenses per unit – Actual fixed expenses per unit))

Flexible budget for fixed expenses = $37,500 + (990 units × ($0 – $33.33))

Flexible budget for fixed expenses = $37,500 – $33,001.70

Flexible budget for fixed expenses = $4,498.30 F

Flexible budget variance for fixed expenses = Flexible budget for fixed expenses – Actual fixed expenses

Flexible budget variance for fixed expenses = $4,498.30 F – $33,000

Flexible budget variance for fixed expenses = $4,498.30 F

Therefore, the answer is B) $4,500 F.

Onyx Décor Company Has Prepared a Static Budget at the Beginning