When a comparison of static and flexible budgets shows an unfavorable sales revenue volume variance, the variable cost volume variance will be favorable.

Question

Quizplus · Accepted Answer

The sales revenue volume variance and variable cost volume variance have an inverse relationship. If sales revenue volume goes down, then the variable cost volume will go down as well, resulting in a favorable variance. Therefore, if the static and flexible budgets show an unfavorable sales revenue volume variance, the variable cost volume variance is likely to be favorable.

When a Comparison of Static and Flexible Budgets Shows an Unfavorable