Smith Corp.has a $6 000 favourable flexible budget variance for January.If January's flexible budget net income was $100 000,which of the following statements is true?
A) Smith's static budget must have showed net income of $106 000.
B) Smith's static budget must have showed net income of $94 000.
C) Smith's actual net income must have been $106 000.
D) Smith's actual net income must have been $94 000.

Question

Quizplus · Accepted Answer

A favourable flexible budget variance means that the actual results were better than the flexible budget. Therefore, if the flexible budget showed a net income of $100,000 and there was a $6,000 favourable variance, the actual net income must have been $106,000.