A company budgeted to sell 10,000 units at £30 each, with variable costs of £18 per unit and fixed costs of £90,000. Actual sales were 9,200 units, generating revenue of £285,200, and total actual costs were £266,000. What is the total variance between actual profit and the flexed budget profit?

Correct answer: B) £1,200 adverse

Explanation

Flexed budget profit = 9,200 x (£30 - £18) - £90,000 = £110,400 - £90,000 = £20,400. Actual profit = £285,200 - £266,000 = £19,200. Variance = £1,200 adverse, because actual profit is below the flexed budget. The £10,800 difference from the original fixed budget also includes the effect of the lower sales volume.