Answer the following questions using the information below:
As part of the budgeting process,Garden Gnomes Incorporated had developed the following static budget for the third quarter.Garden Gnomes is in the process of preparing the flexible budget and understanding the results.The actual information relates to the third quarter.
$\begin{array}{lrlr}
&\text { Actual } & \text { Flexible } & \text { Static } \
&\text { Results } & \text { Budget } & \text { Budget }\
\text { Sales volume (in units) } & 13000 & \underline{\quad\quad} & 12000 \
& & & \
\text { Sales revenues } & \$ 257500 & \$ &\$ 250000 \
\text { Variable costs } & 154000 & \$\underline{\quad\quad} &\underline{180000} \
& & & \
\text { Contribution margin } & 103500 & \$ & 70000 \
& & & \
\text { Fixed costs } & 50500 & \$\underline{\quad\quad} & 49500 \
\text { Operating profit } & \$ 53000 & \$\underline{\quad\quad} & \$ 20500
\end{array}$

-More insight into the static-budget variance can be gained by subdividing it into:
A)a cost hierarchy.
B)the flexible-budget variance and the sales-volume variance.
C)the sales-mix variance and the sales-quantity variance.
D)the market-share variance and the market-size variance.

Question

Answer the following questions using the information below:
As part of the budgeting process,Garden Gnomes Incorporated had developed the following static budget for the third quarter.Garden Gnomes is in the process of preparing the flexible budget and understanding the results.The actual information relates to the third quarter.
 $\begin{array}{lrlr}
&\text { Actual } & \text { Flexible } & \text { Static } \
&\text { Results } & \text { Budget } & \text { Budget }\
\text { Sales volume (in units) } & 13000 & \underline{\quad\quad} & 12000 \
& & & \
\text { Sales revenues } & \$ 257500 & \$ &\$ 250000  \
\text { Variable costs } & 154000 & \$\underline{\quad\quad} &\underline{180000} \ 
& & & \
\text { Contribution margin } & 103500 & \$ & 70000 \
& & & \
\text { Fixed costs } & 50500 & \$\underline{\quad\quad}  & 49500 \
\text { Operating profit } & \$ 53000 & \$\underline{\quad\quad}  & \$ 20500
\end{array}$

-More insight into the static-budget variance can be gained by subdividing it into:
A)a cost hierarchy.
B)the flexible-budget variance and the sales-volume variance.
C)the sales-mix variance and the sales-quantity variance.
D)the market-share variance and the market-size variance.

Quizplus · Accepted Answer

The best choice for subdividing the static-budget variance is into the flexible-budget variance and sales-volume variance. This approach helps understand the budget variance based on changes in actual sales volume and the difference between the actual results and what was budgeted with regards to costs. A cost hierarchy helps classify costs into different categories based on their variability, but it may not provide the same level of insight into the budget variance as the flexible and sales-volume variance. The sales-mix variance and sales-quantity variance relate to changes in the proportion of products sold and the number of units sold, respectively, and may not be relevant in this context. The market-share variance and market-size variance relate to changes in the overall market and are not relevant to understanding Garden Gnomes' budget variance.

Answer the Following Questions Using the Information Below: as Part

Answer the Following Questions Using the Information Below:
as Part