Question

A performance report shows that the planned revenue was $200,000, the flexible budget revenue was $225,000, and actual revenue was $223,000. Which of the following statements are true? A) The activity variance is $25,000 Favorable. B) The activity variance is $25,000 Unfavorable. C) The revenue variance is $2,000 Unfavorable. D) The revenue variance is $2,000 Favorable.

Answer 1

Answer:

A) The activity variance is $25,000 Favorable

C) The revenue variance is $2,000 Unfavorable.

Explanation:

As for the information provided we know that activity variance represents the variance in between the planned activity that is $200,000 and flexible budgeted activity = $225,000

Since revenue is more in flexible budget the variance is favorable.

= $225,000 - $200,000 = $25,000 Favorable.

Further actual revenue earned - the budgeted flexible revenue is the revenue variance, it represents what actually could be achieved and is not achieved.

Thus, it is calculated as = Actual Revenue - Budgeted Flexible Revenue = $223,000 - $225,000 = $2,000 Unfavorable.