If the sales volume variance is $8500 and the static budget is $2000, the flexible budget amount would be ___________?
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Answer: A. $6,500
Explanation
Subtracting the static budget from the sales volume variance determines the flexible budget amount. The calculation subtracts two thousand dollars static budget from eight thousand five hundred variance. This subtraction correctly results in a flexible budget amount of six thousand five hundred dollars. Sales volume variance measures the financial impact of selling a different quantity than planned. Static budgets provide the original operational plan established before the period begins. Flexible budgets adjust expected financial outcomes based on actual operational activity levels.
Management accountants use volume variances to evaluate sales performance against targets. Variance analysis helps executives understand whether revenue deviations stem from volume or price. Proper budget reconciliation ensures accurate financial reporting for corporate stakeholders. Alternative dollar amounts reflect addition or incorrect subtraction of the budget figures. Distractor options fail to apply the proper algebraic formula relating variance and static budgets. Selecting an incorrect choice demonstrates a misunderstanding of sales volume variance mechanics.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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