Reference: 11-11
The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: $$\begin{array} { | l | l | l | }
\hline \text { Labour rate variance: } & \$ 7,000 & \mathrm {~F} \
\hline \text { Labour efficiency variance: } & \$ 12,000 & \mathrm {~F} \
\hline \text { Variable overhead efficiency variance: } & \$ 4,000 & \mathrm {~F} \
\hline \text { Number of units produced: } & 10,000 & \
\hline \text { Standard labour rate per direct labour hour: } & \$ 12 & \
\hline \text { Standard variable overhead rate per direct labour hour: } & \$ 4 & \
\hline \text { Actual labour hours used: } & 14,000 & \
\hline \text { Actual variable manufacturing overhead costs: } & \$ 58,290 & \
\hline
\end{array}$$
-If a company using a flexible budget has a sales revenue variance, the variance results solely from differences in budgeted versus actual selling prices.

Question

Reference: 11-11
The Clark Company makes a single product and uses standard costing. Variable overhead is assigned to production on the basis of direct labour hours. Some data concerning this product for the month of May follow: $$\begin{array} { | l | l | l | } 
\hline \text { Labour rate variance: } & \$ 7,000 & \mathrm {~F} \
\hline \text { Labour efficiency variance: } & \$ 12,000 & \mathrm {~F} \
\hline \text { Variable overhead efficiency variance: } & \$ 4,000 & \mathrm {~F} \
\hline \text { Number of units produced: } & 10,000 & \
\hline \text { Standard labour rate per direct labour hour: } & \$ 12 & \
\hline \text { Standard variable overhead rate per direct labour hour: } & \$ 4 & \
\hline \text { Actual labour hours used: } & 14,000 & \
\hline \text { Actual variable manufacturing overhead costs: } & \$ 58,290 & \
\hline
\end{array}$$
-If a company using a flexible budget has a sales revenue variance, the variance results solely from differences in budgeted versus actual selling prices.

Quizplus · Accepted Answer

The sales revenue variance is calculated as the difference between the actual sales revenue and the budgeted sales revenue. If the actual sales revenue is higher than the budgeted sales revenue, the variance will be favourable. If the actual sales revenue is lower than the budgeted sales revenue, the variance will be unfavourable. The variance is solely due to differences in budgeted versus actual selling prices because the flexible budget takes into account changes in sales volume.

Reference: 11-11 the Clark Company Makes a Single Product and Uses

Reference: 11-11
the Clark Company Makes a Single Product and Uses