A service company prepares a flexible budget based on expected sales revenue of $1,000,000, variable costs of $500,000, and fixed costs of $200,000. Actual results show sales revenue of $900,000, variable costs of $450,000, and fixed costs of $180,000.

• Requirements:
  • Prepare a flexible budget based on actual sales revenue.
  • Calculate the sales volume variance, flexible budget variance, and total budget variance.
  • Analyze the variances and identify possible causes for deviations from the budget.
  • Recommend corrective actions to address unfavorable variances.
  • Discuss the importance of variance analysis in budgetary control and performance evaluation.