Budget Basics
This type of budget is prepared for a single, planned level of activity.
What is a static budget?
A budget adjusted for actual units of activity is called this.
What is a flexible budget?
A variance is labeled this when actual costs exceed budgeted costs.
What is unfavorable?
The variance that measures the difference between actual and expected selling price.
What is the sales price variance?
Actual units = 10,000. Static budget units = 8,000. The variance caused by this difference is called ____.
What is the sales/activity volume variance?
The process of estimating revenues and expenses for future periods.
What is budgeting?
This type of budget ignores changes in activity levels.
What is a static budget?
The difference between actual results and the flexible budget.
What is the flexible budget variance?
This variance occurs when actual sales volume differs from the static budget volume.
What is the sales volume variance?
Actual cost per unit of material = 4 KD vs budgeted 3.5 KD. This type of variance arises.
What is an unfavorable materials price variance?
This budget shows expected cash inflows and outflows for a period.
What is the cash budget?
A major advantage of the flexible budget over the static budget.
What is it provides a more accurate benchmark for performance evaluation?
A variance that results from paying more or less than expected for materials.
What is the materials price variance?
A variance that arises from using a different mix of materials than planned.
What is the materials mix variance?
A company produces more units than planned. Fixed costs do not change. Which budget adjusts correctly?
What is the flexible budget?
The type of budget that begins with expected sales and builds the rest of the budget around it.
What is the operating budget?
The formula used to create a flexible budget uses these two cost behavior components.
What are fixed costs and variable cost per unit?
This variance isolates the impact of using more or fewer input quantities than planned.
What is the materials quantity variance?
The variance that captures differences in the quantity of labor hours used.
What is the labor efficiency variance?
Labor hours were lower than expected, and actual rates were also lower. The labor rate and efficiency variances are:_____
What are both favorable?
This long-term budget supports strategic planning and focuses on capital investments.
What is the capital expenditure budget?
This difference explains why flexible budget variances are more meaningful than static budget variances.
What is that flexible budgets match actual activity levels, removing volume effects?
The two main variances used to evaluate labor performance.
What are labor rate variance and labor efficiency variance?
The manufacturing overhead variance that results from differences in actual and applied overhead.
What is the overhead volume variance?
A flexible budget shows cost of 50,000 KD at 5,000 units. Actual cost is 60,000 KD at the same activity level. Identify the variance.
What is a 10,000 KD unfavorable spending variance?