Question

The California Fitness Company completed the flexible budget analysis for the second​ quarter, which is given below. Actual Results Flexible Budget Variance Flexible Budget Sales Volume Variance Static Budget Units 12 comma 850 0 12 comma 850 1 comma 050 F 11 comma 800 Sales Revenue $ 62 comma 780 $ 1 comma 240 U $ 64 comma 020 $ 3 comma 980 F $ 60 comma 040 Variable Costs 27 comma 520 560 U 26 comma 960 $ 1 comma 670 U 25 comma 290 Contribution Margin $ 35 comma 260 $ 1 comma 800 U $ 37 comma 060 $ 2 comma 310 F $ 34 comma 750 Fixed Costs 34 comma 280 200 U 34 comma 080 $ 0 34 comma 080 Operating​ Income/(loss) $ 980 $ 2 comma 000 U $ 2 comma 980 $ 2 comma 310 F $ 670 Which of the following statements would be a correct analysis of the flexible budget variance for variable​ costs? A. increase in fixed costs B. decrease in sales price per unit C. increase in variable cost per unit D. increase in sales volume

Answer 1

Solution:

Flexible budget variance for variable cost is unfavorable by $560, it means actual variable cost per unit is higher than standard variable cost per unit.

Therefore correct analysis of the flexible budget variance for variable​ costs is "increase in variable cost per unit"

Hence option C is correct.