Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Armati, SA., had the following budgeted data:
The following actually occurred:
The flexible budget variance for total cost for 2004 is

A) £90 U.
B) £140 U.
C) £230 U.
D) £50 U.

Question

Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Armati, SA., had the following budgeted data:
The following actually occurred:
 The flexible budget variance for total cost for 2004 is

A) £90 U. 
B) £140 U. 
C) £230 U. 
D) £50 U.

Quizplus · Accepted Answer

To calculate the flexible budget variance for total cost, we need to first calculate the flexible budget amount for total cost based on the actual output level of 42,000 units.

Flexible budget amount = Variable cost per unit × Actual output + Fixed costs 
Flexible budget amount = (£2.20 × 42,000) + £25,000 
Flexible budget amount = £92,400

Next, we can calculate the flexible budget variance by subtracting the flexible budget amount from the actual cost:

Flexible budget variance = Actual cost - Flexible budget amount 
Flexible budget variance = £92,260 - £92,400 
Flexible budget variance = £140 U

Therefore, the correct answer is B) £140 U.