Flexing budget variance analysis

Question 1

What are variances

Answer 1

effect of making actual profit lower == adverse

effect of increasing profit beyond budgeted profit == favourable

budgeted profit + all favourable variances - all adverse variances = actual profit

Question 2

Sales volume variance

Answer 2

Profit from original budget - Profit from flexed budget

Question 3

Sales Price Variance

Answer 3

Flexed budget Sales Revenue - Actual Budget Sales Revenue

Question 4

Direct Material Usage Variance

Answer 4

(Actual Quantity used - Budgeted Quantity) * Budgeted Cost per unit

or

(SQ * AP - AQ) * SP

Question 5

Direct material price variance

Answer 5

Actual cost of materials used - Budgeted Cost

(AQSP)-(AQAP)

Question 6

Direct Labour Efficiency Variance

Answer 6

(Actual hours worked - budgeted hours) * Labour rate per hour

Question 7

Direct Labour Rate Variance

Answer 7

actual cost of hours worked - budgeted cost of hours worked