A flexible budget totals $120,000 at 10,000 units and $130,000 at 12,000 units. Actual costs are $130,000 and 10,000 units were produced. How does the department stand?

1. A flexible budget is read at the activity level that actually occurred. 2. Actual production was 10,000 units, so the relevant budget is $120,000, not $130,000. 3. Actual costs of $130,000 exceed that budget by $10,000, so the department is over budget. 4. Had 12,000 units been produced, the same $130,000 of cost would have matched the budget exactly. 5. Comparing $130,000 of cost with the 12,000 unit column is the trap this question sets. _Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 7.3 Flexible Budget_