Question

The static budget, at the beginning of the month, for Vintage Wine Company follows: Static budget: Sales volume: 2000 units; Sales price: $50.00 per unit Variable costs: $13.00 per unit; Fixed costs: $25,500 per month Operating income: $48,500 Actual results, at the end of the month, follows: Actual results: Sales volume: 1900 units; Sales price: $58.50 per unit Variable costs: $16.00 per unit; Fixed costs: $34,300 per month Operating income: $46,450 Calculate the flexible budget variance for variable costs. $24,700 F $1650 U $30,400 U $5700 U

Answer 1

Answer:

The flexible budget variance for variable costs is $5,700 unfavorable.

Thus, the correct option is d. $5700 U

Explanation:

Variable cost : The variable cost is that cost which is change according to the production level changes.

Variance : In accounting terms, the variance is a difference between actual and static values in terms of total cost or per unit.

The calculation of variable cost variance is shown below :

Variable cost variance = (Static variable cost per unit - Actual variable cost per unit) × actual sales volume

= ($13.00 per unit = $16.00 per unit) × 1900 units

= - $5,700 or $5,700 unfavorable

Hence, the flexible budget variance for variable costs is $5,700 unfavorable.

Thus, the correct option is d. $5700 U