The static budget variance for materials is £200 F and the budgeted cost for materials is £52,000. If the budgeted volume is 13,000 and the actual volume is 13,500, then the flexible budget variance is
A)£2,200 F.
B)£3,000 F.
C)£2,000 F.
D)£1,800 F.

Question

Quizplus · Accepted Answer

The flexible budget variance can be calculated by adjusting the static budget for the actual volume of output. The static budget variance is £200 F, meaning the actual cost was £200 less than the budgeted cost. The budgeted cost for materials is £52,000 for a budgeted volume of 13,000 units. This gives a budgeted cost per unit of £52,000 / 13,000 = £4 per unit. With an actual volume of 13,500 units, the flexible budget for materials would be 13,500 units * £4 per unit = £54,000. Since the actual cost was £200 less than the static budget of £52,000, the actual cost was £51,800. Therefore, the flexible budget variance is £54,000 (flexible budget) - £51,800 (actual cost) = £2,200 F, indicating that the actual cost was £2,200 less than the flexible budget.

The Static Budget Variance for Materials Is £200 F and the Budgeted