Final answer:
When both the static budget profit variance of -$200,000 and the flexible profit variance of +$200,000 are considered, it indicates that the volume forecast error accounted for the negative variance, and when this error is corrected, the business effectively broke even. Therefore, the correct option is B.
Step-by-step explanation:
The correct statement about the situation where the static budget profit variance is -$200,000 while the flexible profit variance is +$200,000 is b. When the volume forecast error is accounted for, the business broke even.
The static budget variance is measured against the original budget set before actual sales volume is known, without adjustments for the actual level of output. Therefore, a negative variance here indicates that the business performed worse than expected. The flexible profit variance adjusts the budget to the actual level of output and sales volume. A positive flexible profit variance indicates that the business performed better than the flexed budget, which accounts for the actual volume.
When both variances are taken into account, if the static variance is negative and the flexible variance is positive by the same amount, it implies that the business's poorer performance compared to the original budget was due to forecasting errors in volume. Once those are corrected by the flexible budget, we can understand that the company essentially made no profit or loss beyond what was budgeted (broke even) after adjusting for the volume forecast error.