Variances Flashcards
1
Q
What is the purpose of budgets ? PP171
A
- Managers can plan their operations
- difference between actual and budgeted results = budgeted variance
2
Q
What is variance? P172
A
- Difference - actual costs incurred and budgeted costs
3
Q
What else can variance be calculated for? P172
A
- Sales revenue
4
Q
How is variance expressed and how is this dennoted ? P172
A
- Monetary terms
- Favourable = actual costs / budgeted revenue < budggeted costs / actual revenue
- Adverse = actual costs / budgeted revenue > budgeted costs/ actual revenue
5
Q
What are fixed budgets ? P175
A
Advance of period
measure - resources rquired for activity level
6
Q
What are fixed budgets useful for ? P175
A
- Planning
- control constrained = actual activity level different from budgeted level
- meangingless compar budgeted activiy of 10,000 to activity level of 12,00000 units
- like for like
7
Q
How are like ofr likel comparisons made ? P176
A
Flexible budget
8
Q
What are flexible budgets ? P176
A
- Adjusted - shhow budgeted revenue and costs - actual activity level
- Orginal budget ( flex up or down) = actual activity level
9
Q
What does preparing felxible buudgets depend on ? P176
A
- Identifying behavuour of revenue and costs
- revenue costs is variable = budgeted figure/ budgeted activity level = budgeted costs per unit
- budgeted cost per unit * actual activity level = flexed budget figure
10
Q
What if revenue costs for flexible budgets are fixed ? P177
A
- Unchanged during activity level
- step fixed = fixed costs to be increased using flexed budget
