Mo' Joe Coffee Houses budgeted sales of 120,000 units of its premier coffee at $3.50 per unit for the year ended December 31, 20X4, and anticipated a contribution margin ratio of 25% with fixed costs of $50,000. Actual results reflected intense price competition resulting in reduced sales (90,000 units). Unit selling price fell to $2.80, and increased costs reduced contribution margins to 20%. Actual fixed costs materialized at $55,000. The actual financial and volume results displayed in comparison to the master budgets are as follows:
| Master Budget | Actual | Variance | |
|---|---|---|---|
| Sales | $ 420,000 | $ 252,000 | $ (168,000) |
| Variable costs | 315,000 | 201,600 | 113,400 |
| Contribution Margin | 105,000 | 50,400 | (54,600) |
| Fixed costs | 50,000 | 55,000 | (5,000) |
| Operating income | $ 55,000 | $ (4,600) | $ (59,600) |
| Units Sold | 120,000 | 90,000 | |
| Contribution margin ratio | 25% | 20% | |
| Selling price | $3.50 | $2.80 |
If Mo' Joe elects to analyze its results using a flexible budget format, what is the flexible budget variance relative to operating income?
| a. | ($26,250) | |
| b. | ($33,350) | |
| c. | ($28,350) | |
| d. | $28,750 |
