Question

Banner systems is a start-up company that makes connectors for high-speed internet connections. the company has budgeted variable costs of $140 for each connector and fixed costs of $7,000 per month. banner systems' static budget predicted production and sales of 100 connectors in august, but the company actually produced and sold only 70 connectors at a total cost of $24,000. banner systems' flexible budget variance for total costs is

Answer 1

Banner Systems' flexible budget variance for total costs is $7,200 unfavorable, as they incurred $24,000 in total costs against the flexible budget of $16,800 for the actual production and sales of 70 connectors.

Step-by-step explanation:

The question at hand involves understanding flexible budget variances within the scope of managerial accounting. A flexible budget variance is the difference between what was actually incurred and what should have been spent, according to the flexible budget for the actual level of output.

In this scenario, Banner Systems expected to produce and sell 100 connectors at a budgeted variable cost of $140 each, and fixed costs of $7,000. The flexible budget for 70 units would thus be $7,000 in fixed costs plus ($140 * 70) for the variables costs, totaling $16,800. However, the company incurred total actual costs of $24,000.

The flexible budget variance is calculated by subtracting the flexible budget amount for the actual units sold from the actual cost incurred: $24,000 (actual costs) - $16,800 (flexible budget) = $7,200. So, Banner Systems' flexible budget variance for total costs is a $7,200 unfavorable variance, because the company spent more than what was budgeted for the actual level of production and sales.