The total operating-income variance for any period:
A) Is unaffected by variances between actual and budgeted sales volume.
B) Can be decomposed into a total flexible-budget variance and a sales-volume variance.
C) Can be decomposed into a total flexible-budget variance and a sales price variance.
D) Is equal to the sum of selling and administrative expense variances plus the total sales-volume variance for the period.
E) Equals the sum of the total flexible-budget variance plus the sales-mix variance for the period.

Question

Quizplus · Accepted Answer

The total operating-income variance can be broken down into two components: the flexible-budget variance and the sales-volume variance. The flexible-budget variance measures the difference between actual and budgeted results based on actual sales volume, while the sales-volume variance measures the difference between actual and budgeted results based on a different sales volume. Therefore, option B is correct. The other options do not accurately reflect the components of the total operating-income variance.

The Total Operating-Income Variance for Any Period