Question

The static​ budget, at the beginning of the​ month, for Divine​ Décor Company,​ follows: Static​ budget: Sales​ volume: 1 comma 200 ​units; Sales​ price: $ 70 per unit Variable​ costs: $ 32 per​ unit; Fixed​ costs: $ 38 comma 000 per month Operating​ income: $ 7 comma 600 Actual​ results, at the end of the​ month, follows: Actual​ results: Sales​ volume: 990 ​units; Sales​ price: $ 75 per unit Variable​ costs: $ 35 per​ unit; Fixed​ costs: $ 34 comma 700 per month Operating​ income: $ 4 comma 900 Calculate the flexible budget variance for sales revenue.

Answer 1

The flexible budget variance for sales revenue is calculated by subtracting the flexible budget sales revenue from the actual sales revenue. In this case, it results in a favorable variance of $4,950, showing that Divine Décor Company's actual sales revenue was higher than what the flexible budget predicted for the given volume.

Step-by-step explanation:

To calculate the flexible budget variance for sales revenue, we need to compare the actual revenue to what the revenue would have been if the static budget were adjusted to the actual sales volume. The static budget had predicted sales of $84,000 (1,200 units × $70 per unit). However, the actual results show that the Divine Décor Company sold 990 units at $75 per unit, totaling $74,250.

The flexible budget amount for sales revenue would take the actual quantity of units sold and multiply it by the static budget's sales price per unit, which gives us 990 units × $70 per unit = $69,300. The flexible budget variance is the difference between the actual sales revenue and the flexible budget sales revenue. So, the flexible budget variance for sales revenue is $74,250 (actual) - $69,300 (flexible budget) = $4,950 favorable, since the actual revenue exceeded the flexible budget amount.

Answer 2

$5,650 Favorable

Step-by-step explanation:

The computation of flexible budget variance for sales revenue is given below:-

Flexible budget variance for sales revenue = Actual sales - Flexible budget sales

= (990 × $75) - (980 × $70)

= $74,250 - $68,600

= $5,650 Favorable

Therefore for computing the flexible budget variance for sales revenue we simply applied the above formula.