1. Initially youre given the departments budgeted and actual performance. Budgeted expenses are $13,000 and actual expenses total $16,512. Whats the expense variance?
2. Is this a good or bad variance, from a financial perspective?
3. To delve deeper into why this variance exists and what to do about it, you suggest putting together a flexible budget Briefly explain what a flexible budget is. What information do you need to construct a flexible budget?
4. You begin asking your friend for the information you need to construct a flexible budget. Your friend gives you the following information:

The budgeted variable cost per pound of laundry is $0.072

The actual variable cost per pound of laundry is $0.0799

The budgeted volume is 125,000 pounds

The actual volume is 156,600 pounds.

Budgeted fixed cost is $4,000

Actual fixed cost is $4,000

Use these figures to find the original (static) budgeted expense, the actual expense, and the flexible budget expense. (Find total expenses, not expenses per pound of laundry)

Original (static) budgeted expense

1. Use the information from question 4 to find actual expenses.

2. Use the information from question 4 to find flexible budget expense

3. Your friend quickly points out that the laundry provided a greater volume of services (cleaned more pounds of laundry) than expected in the original budget. How much of the total expense variance can be explained by the fact that the laundry produced more output than budgeted?

Hint: think about what type of variance gives you information on how much of a total variance is caused by unexpected changes in volume