The Carolina Products Company has completed the flexible budget analysis for the second quarter,which is as given below.
- Which of the following statements would be a correct interpretation of the flexible budget variance for fixed expenses?

Question

The Carolina Products Company has completed the flexible budget analysis for the second quarter,which is as given below. 
- Which of the following statements would be a correct interpretation of the flexible budget variance for fixed expenses?

Quizplus · Accepted Answer

The fixed expenses in a flexible budget are fixed for a specific level of production or sales volume. If there is an increase in fixed costs, it means that the actual fixed expenses are higher than what was planned in the flexible budget, resulting in an unfavorable flexible budget variance for fixed expenses. Therefore, an increase in fixed costs is the correct interpretation of the flexible budget variance for fixed expenses. The other options listed (decrease in price per unit, increase in variable cost per unit, and increase in sales volume) relate to the flexible budget variance for variable expenses, not fixed expenses.

The Carolina Products Company Has Completed the Flexible Budget Analysis