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Which of the following variances will always be unfavorable when actual sales units exceeds budgeted sales...

Which of the following variances will always be unfavorable when actual sales units exceeds budgeted sales units? Select one: a. variable cost b. fixed cost c. sales revenue d. operating profit e. contribution margin

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Answer #1

option (a) i.e. Variable cost variance will always be unfavourable if actual sales unit exceeds budgeted units.

This is so, because with increase in sales units, the variable cost will also increase, which when compared with budgeted variable cost, lead to unfavourable variance.

On the other hand, sales revenue variance, operating margin variatiin and contribution margin will be favourable when number of units increases (as profit will increase with increase in sales).

Increase in sales units will not impact the fixed cost, at these cost remains fixed, now matter how many units are sold.

Incase of any doubt, please comment below. I would be happy to help.

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