Huang Consumer Products has a small car division that operates as a profit center.Below is a partially completed performance report for the first quarter.
- How much is the percentage variance for the flexible budget variance for sales revenue?
A)1.7 % F
B)1.7 % U
C)3.4 % U
D)3.4 % F

Question

Huang Consumer Products has a small car division that operates as a profit center.Below is a partially completed performance report for the first quarter. 
- How much is the percentage variance for the flexible budget variance for sales revenue?
A)1.7 % F 
B)1.7 % U 
C)3.4 % U 
D)3.4 % F

Quizplus · Accepted Answer

To find the flexible budget variance for sales revenue, we need to compare the actual revenue to the flexible budget revenue. 
Flexible budget revenue = flexible budget sales price × actual units sold 
Flexible budget sales price = budgeted sales price per unit + budgeted variable cost per unit 
Flexible budget sales price = $24 + $12 = $36 
Flexible budget revenue = $36 × 18,000 = $648,000

Flexible budget variance for sales revenue = Actual revenue - Flexible budget revenue 
Flexible budget variance for sales revenue = $645,120 - $648,000 = -$2,880

Since the actual revenue is less than the flexible budget revenue, the variance is unfavorable or unfavorable.

To calculate the percentage variance, we use the formula: 
Percentage variance = (Variance ÷ Flexible budget revenue) × 100

Percentage variance = (-$2,880 ÷ $648,000) × 100 
Percentage variance = -0.44%

Since the percentage variance is negative, we know that the variance is unfavorable. However, we need to choose the option that corresponds to the absolute value of the percentage variance.

The absolute value of -0.44% is 0.44%, which is closest to option B (1.7% U). Therefore, the answer is B.

Huang Consumer Products Has a Small Car Division That Operates