An unfavorable flexible budget variance in operating income might be due to a(n)________.
A) increase in sales price per unit
B) decrease in sales volume
C) increase in variable cost per unit
D) decrease in fixed costs

Question

Quizplus · Accepted Answer

An unfavorable flexible budget variance in operating income implies that actual operating income was lower than the budgeted operating income. This could be due to an increase in variable cost per unit, which would reduce the contribution margin per unit and lead to a lower operating income even if sales volume and sales price per unit were the same as budgeted. An increase in sales price per unit (A) or decrease in fixed costs (D) would increase the contribution margin per unit and operating income if sales volume remained unchanged. A decrease in sales volume (B) would decrease operating income, but this is a volume variance and not a flexible budget variance.

An Unfavorable Flexible Budget Variance in Operating Income Might Be