Question

The total variable cost flexible-budget variance for any given period:

Multiple Choice

• Is directly affected by the difference between actual sales volume and the sales volume embodied in the flexible budget.

• Is decomposable into production-volume and production-mix components.

• Can be broken down into flexible-budget variances for major costs such as materials, labor, variable overhead, and variable selling expenses.

• Is decomposable into sales-volume and sales-mix components.

• Is the difference between actual total variable cost incurred and master budgeted total variable cost.

Answer 1

Correct answer is option C - Can be broken down into flexible-budget variances for major costs such as materials, labor, variable overhead, and variable selling expenses.

Variable cost include materials, labor, overheads which are variable in nature and variable selling expenses. As the variable cost flexible-budget variance is the difference of such cost as per the flexible budget and the actual result. Thus the same can be broken down into these components.

Also it is to be noted that, The variable cost variance is not dependant on sales volume. Also, it is also changes as the cost per unit apart from production volume and production mix. Also, this variance is not the one which result while comparing actual result with master budget.