AquaCool produces and sells premium bottled water sourced from natural springs.

The budget for 2024 was to sell 50,000 bottles for $5 each. At the end of 2024, Vicky has sold 50,966 bottles and has actual sales revenue of $260,000.

Calculate the flexible budget variance for sales revenue.

Question

AquaCool produces and sells premium bottled water sourced from natural springs.

The budget for 2024 was to sell 50,000 bottles for $5 each. At the end of 2024, Vicky has sold 50,966 bottles and has actual sales revenue of $260,000.

Calculate the flexible budget variance for sales revenue.

BlackTom AI · Accepted Answer

Reiterate the problem: AquaCool budgeted to sell 50,000 bottles at $5 each for 2024, but actual results show 50,966 bottles sold with actual sales revenue of $260,000. The task is to calculate the flexible budget variance for sales revenue.

Step 1: Determine the flexible budget revenue using actual volume.
- Flexible budget revenue = actual quantity × budgeted price per unit
- Actual quantity = 50,966 bottles
- Budgeted price per unit = $5
- Flexible budget revenue = 50,966 × 5 = $254,830

Step 2: Compare actual revenue to the flexible budget revenue.
- Actual revenue = $260,000
- Flexible budget revenue = $254,830
- Variance = Actual revenue − Flexible budget revenue = 260,000 − 254,830 = $5,170

Step 3: Determine the nature of the variance.
- Since actual revenue exceeds the flexible budget revenue, the variance is favorable (positive) because more revenue was earned than what would be expected at the actual volume priced at the budgeted rate.

Notes on context and common pitfalls:
- It is important to use actual volume (50,966) for the flexible budget, not the original static budget quantity (50,000), to isolate the revenue variance due to volume and price efficiency at the budgeted price.
- If someone used the original 50,000 bottles in the calculation, they would get a different, incorrect variance, misattributing the effect of volume change.
- The given correct result aligns with the calculation: $5,170 favorable.

In summary, the flexible budget variance for sales revenue is $5,170 favorable because actual revenue ($260,000) exceeded the flexible budget revenue for the actual volume ($254,830).

BACC011 Quiz 5- Requires Respondus LockDown Browser

AquaCool produces and sells premium bottled water sourced from natural springs. The budget for 2024 was to sell 50,000 bottles for $5 each. At the end of 2024, Vicky has sold 50,966 bottles and has actual sales revenue of $260,000. Calculate the flexible budget variance for sales revenue.

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