If a static budget forecasted 100,000 units to be sold in the fiscal year and actual units sold amounted to 120,000,what assumption could be made under a flexible budget process?
A)Since the actual volume exceeds the budgeted volume,there is an unfavourable volume variance for output.
B)Fixed costs would increase in the flexible budget due to the volume change.
C)The effectiveness of the manager is in question.
D)Variable costs will be higher than projected in the static budget due to the volume variance.

Question

Quizplus · Accepted Answer

A flexible budget adjusts for changes in volume, so variable costs will be higher than projected in the static budget due to the volume variance. Fixed costs will remain the same in this scenario. The effectiveness of the manager cannot be determined based solely on sales volume exceeding the budgeted amount. Choice A is incorrect as an unfavorable volume variance would occur if actual sales were less than the budgeted amount. Choice B is incorrect as fixed costs do not change with changes in sales volume.

If a Static Budget Forecasted 100,000 Units to Be Sold