Danner Fashions sells a line of women's dresses.Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.T
$$\begin{array} { | l | r | r | }
\hline & \text { Actual } & \text { Budget } \
\hline \text { Dresses sold } & 5,000 & 6,000 \
\hline \text { Sales } & \$ 235,000 & \$ 300,000 \
\hline \text { Variable costs } & \underline { ( 145,000 ) } & \underline { ( 180,000 ) } \
\hline \text { Contribution margin } & \$ 90,000 & 120,000 \
\hline \text { Fixed Costs } & \underline { ( 84,000 ) } & \underline { ( 80,000 ) } \
\hline \text { Operating inc ome } & \underline { \$ 6,000 }&\underline { \$ 40,000} \
\hline
\end{array}$$he variable cost flexible budget variance for November is:
A) $5,000 favorable.
B) $5,000 unfavorable.
C) $4,000 favorable.
D) $4,000 unfavorable.

Question

Danner Fashions sells a line of women's dresses.Danner's performance report for November is shown below: (CMA adapted) The company uses a flexible budget to analyze its performance and to measure the effect on operating income of the various factors affecting the difference between budgeted and actual operating income.T
$$\begin{array} { | l | r | r | } 
\hline & \text { Actual } & \text { Budget } \
\hline \text { Dresses sold } & 5,000 & 6,000 \
\hline \text { Sales } & \$ 235,000 & \$ 300,000 \
\hline \text { Variable costs } & \underline { ( 145,000 ) } & \underline { ( 180,000 ) } \
\hline \text { Contribution margin } & \$ 90,000 & 120,000 \
\hline \text { Fixed Costs } & \underline { ( 84,000 ) } & \underline { ( 80,000 ) } \
\hline \text { Operating inc ome } & \underline { \$ 6,000 }&\underline { \$ 40,000} \
\hline
\end{array}$$he variable cost flexible budget variance for November is:
A) $5,000 favorable.
B) $5,000 unfavorable.
C) $4,000 favorable.
D) $4,000 unfavorable.

Quizplus · Accepted Answer

The flexible budget variance for variable costs is calculated by comparing the actual variable costs to the flexible budget variable costs for the actual level of activity (5,000 dresses). The budgeted variable cost per dress is $180,000 / 6,000 = $30. For 5,000 dresses, the flexible budget variable costs would be 5,000 x $30 = $150,000. The actual variable costs were $145,000, resulting in a $5,000 favorable variance ($150,000 - $145,000).

Danner Fashions Sells a Line of Women's Dresses He Variable Cost Flexible Budget Variance for November Is: A)

Danner Fashions Sells a Line of Women's Dresses He Variable Cost Flexible Budget Variance for November Is:
A)