When the static budget amount is $6200 and the flexible budget amount is $4500, the sales volume variance will be __________?
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Answer: B. $1,700
Explanation
The sales volume variance equals the absolute difference between the static and flexible budgets. Subtracting $4500 from $6200 results in a variance of $1700. This isolates the financial effect of volume differences from cost performance. Variance analysis separates operational performance into distinct revenue and cost components. Sales volume variance specifically highlights the impact of producing and selling different unit quantities. It bridges static planning and flexible performance measurement.
Financial controllers review these variances monthly to track operational goal achievement. Management uses the output to adjust production schedules and sales targets. It ensures resources align with actual market demand. Option A simply restates the original static budget amount without comparison. Option C multiplies the variance incorrectly by a factor of ten. Option D restates the flexible budget value instead of the difference.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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