QuestionAugust 12, 2025

An unfavorable flexible budget variance in operating income might be due to a(n) __ A. increase in sales price per unit B. decrease in fixed costs C. decrease in sales volume D. increase in variable cost per unit

An unfavorable flexible budget variance in operating income might be due to a(n) __ A. increase in sales price per unit B. decrease in fixed costs C. decrease in sales volume D. increase in variable cost per unit
An unfavorable flexible budget variance in operating income might be due to a(n) __
A. increase in sales price per unit
B. decrease in fixed costs
C. decrease in sales volume
D. increase in variable cost per unit

Solution
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Answer

C. decrease in sales volume ### D. increase in variable cost per unit Explanation 1. Identify the impact of each option on operating income A. Increase in sales price per unit would increase operating income, not cause an unfavorable variance. B. Decrease in fixed costs would increase operating income, not cause an unfavorable variance. C. Decrease in sales volume would reduce total revenue, leading to a decrease in operating income, causing an unfavorable variance. D. Increase in variable cost per unit would increase total costs, reducing operating income, causing an unfavorable variance.

Explanation

1. Identify the impact of each option on operating income<br /> A. Increase in sales price per unit would increase operating income, not cause an unfavorable variance.<br /> B. Decrease in fixed costs would increase operating income, not cause an unfavorable variance.<br /> C. Decrease in sales volume would reduce total revenue, leading to a decrease in operating income, causing an unfavorable variance.<br /> D. Increase in variable cost per unit would increase total costs, reducing operating income, causing an unfavorable variance.
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