Answer (B) is correct . The sales-volume variance is the difference between the flexible-budget contribution margin and the static (master) budget contribution margin. Its components are the sales quantity and sales mix variances. The contribution margin is used rather than operating income because fixed costs are the same in both budgets. Unit sales price and variable cost are held constant so as to isolate the effect of the difference in unit sales volume. Because the flexible-budget contribution margin ($110,000) is less than the master-budget amount ($120,000), the variance ($10,000) is unfavorable.
Answer (A) is incorrect because The sales-volume variance is the difference between the flexible-budget contribution margin ($110,000) and the master-budget amount ($120,000). The $10,000 variance is unfavorable because the flexible-budget amount is less than the master-budget contribution margin.
Answer (C) is incorrect because The difference between actual and flexible variable costs is $11,000. The sales-volume variance is the difference between the flexible-budget contribution margin ($110,000) and the master-budget amount ($120,000). The $10,000 variance is unfavorable because the flexible-budget amount is less than the master- budget contribution margin.
Answer (D) is incorrect because The difference between the flexible-budget revenue ($220,000) and the actual revenue ($208,000) is $12,000. The sales-volume variance is measured as the difference between the flexible-budget contribution margin and the master-budget contribution margin.
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The sales volume variance is
