The Kentucky Foam Products Company completed the flexible budget analysis for the second quarter,which is given below. Which of the following would be a correct analysis of the sales volume variance for variable costs?

Question

The Kentucky Foam Products Company completed the flexible budget analysis for the second quarter,which is given below.  Which of the following would be a correct analysis of the sales volume variance for variable costs?

Quizplus · Accepted Answer

The sales volume variance for variable costs is calculated as the difference between the flexible budget for variable costs at the actual sales volume and the total actual variable costs. Therefore, an increase in sales volume would result in a favorable (positive) sales volume variance for variable costs, as the higher sales volume would allow for a better utilization of resources and economies of scale. Decrease in sales price per unit or increase in variable cost per unit would affect the sales price variance or variable cost variance respectively. An increase in fixed costs would not affect the sales volume variance for variable costs directly.

The Kentucky Foam Products Company Completed the Flexible Budget Analysis