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Hanno had the following static budget for March, when it expected to sell 4,000 sandwiches: Sales...

Hanno had the following static budget for March, when it expected to sell 4,000 sandwiches:

Sales revenue $ 48,000
Variable costs $ 32,000
Fixed costs $ 5,000
Net income $11,000


Hanno actually sold 5,000 sandwiches during March at $12 each. Variable costs were $38,000 and fixed costs were $4,800.

A. Prepare a flexible budget at for March that will help Hanno separate the volume variance from the flexible budget variance. Make your income statement match my format and compute net income.

B. What is the volume variance for variable costs?

C. What is the flexible budget variance for variable costs?

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Answer #1
Answer -
Units Static 4000 5000 5000
Static Budget Flexible Budget Actual
Sales revenue 48000 60000 60000
Variable costs 32000 40000 38000
Fixed costs 5000 5000 4800
Net Income 11000 15000 17200
B Volume variance for variable costs Budgeted Variable Cost -Actual Variable Cost
=32000-38000
6000 Unfavourable
C Flexible Budget Variance for variable costs Flexible Budget Variable cost -Actual Variable Cost
=40000-38000
2000 Favourable
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