Calculate the Total Flexible Budget Variance.

Question

BlackTom AI · Accepted Answer

We begin by restating the problem and listing the options to ensure clarity about what we are evaluating.
Question: Calculate the Total Flexible Budget Variance.
Answer options: 176,600; 12,560; -161,200; -187,600; 54,600; -124,800

Now, evaluate each option one by one with reasoning that could lead to the determination of the correct value in a typical flexible budget variance calculation.
Option 1: 176,600. This positive value suggests that actual spending or revenue exceeded the flexible budget by 176,600 or that the flexible budget variance turned favorable by that amount. To assess plausibility, we would compare actual results to the flexible budget at actual activity levels and compute the difference. If actual revenue exceeded the flexible-budget revenue or actual costs were lower than the flexible-budget costs by 176,600, this would yield a positive variance.
Option 2: 12,560. A relatively small positive variance could arise if actual figures were slightly better than the flexible budget, but the magnitude is modest. We would check whether the combined differences between actual and flexible-budget amounts across revenue and costs net to +12,560 after accounting for volume and rate variances.
Option 3: -161,200. A sizable negative variance implies actual outcomes were significantly worse than the flexible budget, which could result from higher costs, lower revenue, or a combination that outweighed any favorable components. This would indicate an unfavorable deviation from the flexible plan.
Option 4: -187,600. This is another substantial negative variance, even more unfavorable than -161,200. It would occur if actual costs exceeded flexible-budget costs by a large margin or if actual revenue fell short by a considerable amount, or a mix that produces a net unfavorable result.
Option 5: 54,600. A moderate positive variance, suggesting some favorable performance relative to the flexible budget. We would verify whether either costs were lower than planned, revenues were higher, or both, enough to net to +54,600.
Option 6: -124,800. A negative variance of this size indicates unfavorable performance, but not as extreme as -187,600. It would arise from overruns in spending or shortfalls in revenue relative to the flexible budget.

In the context of a Total Flexible Budget Variance, the calculation typically aggregates differences between actual results and the flexible budget (at actual activity level) for all relevant items (revenues and costs). The sign convention matters: positive variances are favorable (actuals better than flexible budget for the period), and negative variances are unfavorable. To determine which option is correct, one would perform the precise computation using the actual figures and the flexible budget figures, including whether the variance is driven more by price/ rate variances or volume/efficiency variances.

If you have the actual results and the flexible budget details (revenue, costs, and activity level), we can walk through the exact steps: compute each component of the variance (favorable vs unfavorable for revenue and for each cost category), sum these components, apply the correct sign conventions, and arrive at the Total Flexible Budget Variance. In the absence of the underlying numbers, we can only describe how the options would be interpreted and what each would imply about performance relative to the flexible budget.

ACCTMIS 3300 AU2025 (2004) Midterm 2

Calculate the Total Flexible Budget Variance.

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