Chapter 16 - Operations Budgeting

Question 1

what are the four future items that should be considered when formulating a budget?

Answer 1

financial objectives, revenue forecasts, expense forecasts, net income forecasts

Question 2

what are the four steps to make budget?

Answer 2

financial objectives, revenue forecasting, estimating expenses, projecting fixed charges

Question 3

what are the five steps in the budgetary control process?

Answer 3

1) determination of variances 2) determination of significant variances 3) analysis of significant variances 4) determination of problems 5) action to correct problems

Question 4

what is formula for price variance?

Answer 4

budgeted volume x (actual price - budgeted price)

Question 5

what is formula for volume variance?

Answer 5

budgeted price x (actual volume - budgeted volume)

Question 6

what is formula for price-volume variance?

Answer 6

(actual price - budgeted price) x (actual volume - budgeted volume)

Question 7

what is formula for cost variance?

Answer 7

budgeted volume x (budgeted cost - actual cost)

Question 8

what is formula for volume variance?

Answer 8

budgeted cost x (budgeted volume - actual volume)

Question 9

what is formula for cost-volume variance?

Answer 9

(budgeted cost - actual cost) x (budgeted volume - actual volume)