What is the profit variance for Quiet Flag Industries?

• A. Unfavorable 40,000
• B. Favorable 40,000
• C. Unfavorable 30,000
• D. Favorable 30,000

Answer: (A)

Profit variance measures how actual profit compares with what was budgeted. If actual profit is lower than the budget, the variance is unfavorable; if actual profit is higher, it’s favorable. In this problem, the data show a 40,000 unfavorable variance, meaning Quiet Flag Industries earned 40,000 less profit than planned. This negative difference could come from higher-than-expected costs, lower-than-expected revenues, or a combination of both. The other options would imply that actual profit exceeded the budget (a favorable result) or a different gap size (30,000), which the given figures do not support.