Answer (C) is correct . The sales volume variance is the change in contribution margin caused by the difference between the actual and budgeted volume. It equals the budgeted unit contribution margin times the difference between actual and expected volume, or $8,000 [(12,000 – 10,000) × ($10 – $6)]. The sales volume variance is favorable because actual sales exceeded budgeted sales.
Answer (A) is incorrect because The flexible budget variance is $11,200 favorable ($29,200 actual operating income – $18,000 flexible budget operating income).
Answer (B) is incorrect because The sales price variance is $12,000 [$132,000 actual sales – (12,000 units sold × $10)].
Answer (D) is incorrect because The total projected variable costs at the actual sales level equal $72,000 (12,000 units × $6). Thus, the variable cost variance is $1,200 favorable ($72,000 – $70,800 actual).
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Which one of the following statements concerning Clear Plus’s actual results for May is correct?