Question

Which of the following is not true of the 3 level variance analysis of operating​ income?

a. Level 2 shows the direct material price and efficiency variances
b. Level 2 shows the​ sales-volume variance for operating income
c. Level 3 shows the fixed overhead production volume variance as a component of the​ sales-volume variance for operating income
d. Level 1 shows the static budget variance for operating income

Answer 1

Level 2 in the 3 level variance analysis of operating​ income does not show the sales-volume variance for operating income.

Step-by-step explanation:

Level 2 in the 3 level variance analysis of operating​ income shows the direct material price and efficiency variances. Level 2 also shows the sales-volume variance for operating income. Level 3, on the other hand, shows the fixed overhead production volume variance as a component of the​ sales-volume variance for operating income. Therefore, the option that is not true of the 3 level variance analysis of operating​ income is Option B: Level 2 does not show the sales-volume variance for operating income.

Answer 2

The option that is not true of the 3 level variance analysis of operating income is:

a. Level 2 shows the direct material price and efficiency variances

Step-by-step explanation:

The operating income can be analyzed in three levels. The first level is the static budget versus actual results variance, which shows the difference between the planning budget and the actual results. The second level is the sale-volume variance, while the third level shows the fixed overhead variance. This can be collapsed into level 2, with the final level showing more details about direct material price and efficiency variances, etc.