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What is the formula for calculating the variance in a flexible budget?

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Question: What is the formula for calculating the variance in a flexible budget?

Options:

  1. Actual Costs - Flexible Budget Costs
  2. Flexible Budget Costs - Actual Costs
  3. Budgeted Costs - Actual Costs
  4. Actual Revenue - Budgeted Revenue

Correct Answer: Actual Costs - Flexible Budget Costs

Solution: 

Variance in a flexible budget is calculated as Actual Costs - Flexible Budget Costs.

What is the formula for calculating the variance in a flexible budget?

Practice Questions

Q1
What is the formula for calculating the variance in a flexible budget?
  1. Actual Costs - Flexible Budget Costs
  2. Flexible Budget Costs - Actual Costs
  3. Budgeted Costs - Actual Costs
  4. Actual Revenue - Budgeted Revenue

Questions & Step-by-Step Solutions

What is the formula for calculating the variance in a flexible budget?
  • Step 1: Understand that a flexible budget adjusts based on actual activity levels.
  • Step 2: Identify the actual costs incurred during the period.
  • Step 3: Determine the flexible budget costs, which are the budgeted costs adjusted for the actual activity level.
  • Step 4: Subtract the flexible budget costs from the actual costs to find the variance.
  • Step 5: Write the formula: Variance = Actual Costs - Flexible Budget Costs.
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