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Managerial Accounting

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Flexible Budget Variance for Fixed Costs

MGRACT-YJUETH

Brave Company produces motorcycle helmets. They budgeted to sell 100,000 helmets for the coming year at a variable cost of \$50 a helmet with budgeted annual fixed costs of \$5,000,000 a year.

Bravo budgets that it will be able to sell their helmets for \$120 each. Actual results for the year were selling price of \$115 a helmet for sales and production of 105,000 helmets, total actual variable costs of \$5,000,000 and total actual fixed costs of \$5,000,500.

What is the flexible budget variance for fixed costs?

A

\$525,000 Unfavorable.

B

\$275,500 Unfavorable.

C

\$250,000 Favorable.

D

\$500 Unfavorable.