The actual information pertains to the month of June. As part of the budgeting process, Petrified Products Company developed the following master budget for June. The manager, Pete, is in the process of preparing the flexible budget and understanding the results.

-The PRIMARY reason for low operating profits in June was:
A)the flexible budget variance for flexible (variable)costs.
B)increased capacity-related (fixed)costs.
C)a poor management accounting system.
D)lower sales volume than planned.

Question

The actual information pertains to the month of June. As part of the budgeting process, Petrified Products Company developed the following master budget for June. The manager, Pete, is in the process of preparing the flexible budget and understanding the results.
 
-The PRIMARY reason for low operating profits in June was:
A)the flexible budget variance for flexible (variable)costs. 
B)increased capacity-related (fixed)costs. 
C)a poor management accounting system. 
D)lower sales volume than planned.

Quizplus · Accepted Answer

The master budget was developed based on planned sales volume for June, but the actual sales volume was lower than planned, which resulted in lower revenue and operating profits. Therefore, the primary reason for low operating profits in June was lower sales volume than planned.

The Actual Information Pertains to the Month of June