Question

Ocean Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units, and average selling price was $6.12. The sales revenue flexible budget variance was: A. $6,120 favorable. B. $17,880 favorable. C. $6,000 unfavorable. D. $17,880 unfavorable.

Answer 1

The sales revenue flexible budget variance measures the difference between the actual sales revenue and the flexible budget revenue. In this case, the actual revenue is higher than the flexible budget revenue, resulting in a favorable variance of $6,120.

Step-by-step explanation:

The sales revenue flexible budget variance measures the difference between the actual sales revenue and the flexible budget revenue. It helps in evaluating how well a company is meeting its sales revenue target. In this case, the estimated sales revenue was calculated by multiplying the estimated sales volume (150,000 units) by the estimated selling price ($6.00), resulting in an estimated revenue of $900,000. The actual sales revenue was calculated by multiplying the actual sales volume (149,000 units) by the actual selling price ($6.12), resulting in an actual revenue of $912,720.

To calculate the sales revenue flexible budget variance, subtract the actual revenue from the flexible budget revenue: $912,720 - $900,000 = $12,720. Since the actual revenue is higher than the flexible budget revenue, the variance is favorable. Therefore, the correct answer is option A. $6,120 favorable.

Answer 2

B. $17,880 favorable.

Step-by-step explanation:

Sales revenue flexible budget variance = (149,000 units × $6.12 per unit) − (149,000 units × $6.00 per unit)

Sales revenue flexible budget variance = $911,880 − $894,000 = $17,880 favorable

Since actual sales were greater than the flexible budget amount, the variance is favorable.