Question

In: Finance

In analyzing company operations, the controller of the Jason Corporation found a $250,000 favorable flexible budget...

In analyzing company operations, the controller of the Jason Corporation found a $250,000 favorable flexible budget revenue variance. The variance was calculated by comparing the actual results with the flexible budget. This variance can be wholly explained by

Select one:

a. the total flexible budget variance

b. the total static budget variance

c. changes in unit selling prices

d. changes in the number of units sold

Solutions

Expert Solution

> Concept

The flexible budget variance is calculated by comparing the results generated by a flexible budget and actual results. A flexible budget is a budget that adjusts or flexes with changes in volume or activity.

> Explanation

a. the total flexible budget variance - It is incorrect since revenue variance is part of total variance.

b. the total static budget variance - It is incorrect since static budget variance is different from flexible budget variance

c. changes in unit selling prices - It is correct choice because the flexible budget revenue variance is difference between budgeted revenue and actual revenue at same level of activity. Thus, number of units is same in both flexble budget and actual results, the difference is due to unit price.

d. changes in the number of units sold - It is incorrect choice because the flexible budget revenue variance is difference between budgeted revenue and actual revenue at same level of activity. Thus, number of units is same in both flexble budget and actual results, the difference is not due to number of units.


Hope you understand the solution.

jeff jeffy answered 1 year ago
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