If the actual result is $5500 and the flexible budget based on actual output is $3500, the flexible budget variance is __________?
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Answer: D. $2,000
Explanation
The flexible budget variance is the difference between actual results and the flexible budget. Subtracting the flexible budget of thirty-five hundred from the actual result of fifty-five hundred. This calculation produces a flexible budget variance of two thousand dollars. Flexible budgets adjust planned revenues and expenses to match actual production output levels. This variance isolates operational efficiency by removing the distortion of volume changes. Managers rely on flexible budgets for fair and accurate departmental performance evaluations.
Factory supervisors use flexible budget variances to monitor true operational cost control. Corporate controllers review these variances to catch unexpected cost overruns in production. Evaluating flexible variances helps companies maintain tight control over variable expenses. Option A miscalculates the variance by adding figures instead of finding the difference. Option B restates the actual result without performing any variance calculation. Option C represents the flexible budget figure rather than the calculated variance amount.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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