A. To answer such a question we have to solve for each possible suggested statement. It is better to start with

the easiest ones. When it is not otherwise specified, the flexible budget variance equals the difference between actual operating income and the flexible budget operating income. The flexible budget contribution margin equals actual units times standard contribution margin or $48,000 ($4.00 standard contribution margin × 12,000 actual quantity). Fixed costs in the flexible budget are the same as fixed costs in the flexible budget. Therefore, the flexible budget operating income equals flexible budget contribution margin less the master budget (static budget) fixed costs: $18,000 ($48,000 - $30,000). Now we can determine the flexible budget variance as $11,200 favorable ($29,200 - $18,000). So this statement is not correct.

B. To answer such a question we have to solve for each possible suggested statement. It is better to start with the easiest ones. The sales price variance measures the impact of the difference caused by a variance in price. When it is not specified what item's sales volume variance is referred to, we can assume the contribution margin. The sales price variance for the contribution margin is calculated as follows: (Actual Contribution per unit - Standard Contribution per unit) × Actual Quantity. Actual contribution per unit is $5.10 ($61,200 ÷ 12,000), and the standard contribution margin is $4.00 ($40,000 ÷ 10,000). The sales price variance is therefore $13,200 favorable ($5.10 - $4.00) × 12,000. So this statement is not correct.

C. To answer such a question we have to solve for each possible suggested statement. It is better to start with the easiest ones. The flexible budget variable cost variance is the difference between actual variable costs and the flexible budget variable costs. The standard variable cost is calculated using static (master) budget figures: $60,000 ÷ 10,000 = $6.00. The flexible budget variable cost is calculated as the standard unit variable cost multiplied by the actual level of output ($6.00 × 12,000 = $72,000). The flexible budget variable cost variance is $1,200 favorable ($70,800 - $72,000). So this is not a correct statement.

D. To answer such a question we have to solve for each possible suggested statement. It is better to start with the easiest ones. The sales volume variance measures the impact of difference between actual sales volume and budgeted sales volume. When it is not specified what item's sales volume variance is referred to, we can assume the contribution margin. The sales volume variance is calculated as follows: (Actual Sales Volume - Budgeted Sales Volume) × Standard Contribution per Unit. The standard contribution per unit is $4.00 ($40,000 ÷ 10,000). The sales volume variance is therefore $8,000 favorable (12,000 - 10,000) × $4.00. The variance is favorable as the actual quantity of units sold is greater than budgeted. So this statement is correct.