1B1D ARKIN CO.’S CONTROLLER HAS PREPARED A FLEXIBLE BUDGET FOR THE YE...

86. CSO: 1B1a LOS: 1B1d

Arkin Co.’s controller has prepared a flexible budget for the year just ended, adjusting the

original static budget for the unexpected large increase in the volume of sales. Arkin’s

costs are mostly variable. The controller is pleased to note that both actual revenues and

actual costs approximated amounts shown on the flexible budget. If actual revenues and

actual costs are compared with amounts shown on the original (static) budget, what

variances would arise?

a. Both revenue variances and cost variances would be favorable.

b. Revenue variances would be favorable and cost variances would be unfavorable.

c. Revenue variances would be unfavorable and cost variances would be favorable.

d. Both revenue variances and cost variances would be unfavorable.