Variance Analysis and Budgeting Quiz

Favourable variances occur when actual results are better than planned outcomes.

Unfavourable variances happen when actual results are worse than planned outcomes.

Flexible budgets adjust for changes in activity levels, while static budgets remain fixed regardless of actual activity.

<p>Static budget variances help assess differences between planned outcomes and actual results based on fixed budget figures.</p> Signup and view all the answers

<p>Setting standards affects variances by providing benchmarks for comparison, enabling the evaluation of performance against predetermined criteria.</p> Signup and view all the answers

<p>Price variances reflect differences in the cost of materials or labor, while quantity variances indicate differences in the amount used compared to the standard.</p> Signup and view all the answers

<p>Calculating these variances helps in understanding the differences between actual overhead costs incurred and the standard overhead costs, as well as the efficiency in utilizing overhead resources.</p> Signup and view all the answers

<p>Good (favourable)</p> Signup and view all the answers

<p>When actual profits are lower than budgeted profits</p> Signup and view all the answers

<p>When actual revenues are greater than projected revenues in the budget</p> Signup and view all the answers

<p>Static budget does not change with activity levels, while flexible budget adjusts to different activity levels</p> Signup and view all the answers

<p>When the actual price paid is less than the expected price</p> Signup and view all the answers

<p>Normal operating level where managers focus on cost drivers</p> Signup and view all the answers

<p>Sales revenue increases with the number of units sold</p> Signup and view all the answers

<p>Differences between actual results and what was planned in the static budget.</p> Signup and view all the answers

<p>Differences between actual results and what the flexible budget would have forecasted based on the actual level of output.</p> Signup and view all the answers

<p>Differences from the master budget, sales and cost drivers, and revenue and cost variances.</p> Signup and view all the answers

<p>Differences between actual results and what the flexible budget would have predicted.</p> Signup and view all the answers

<p>By taking the difference between actual units sold and budgeted units, then multiplying by the contribution margin per unit.</p> Signup and view all the answers

<p>Standards help determine if financial results are better or worse than expected.</p> Signup and view all the answers

<p>Every company has its own expected cost targets.</p> Signup and view all the answers

<p>Cost a company expects to pay per unit of product under ideal conditions.</p> Signup and view all the answers

<p>Standard cost is ideal, while expected cost is a more realistic estimate under normal conditions.</p> Signup and view all the answers

<p>Standards that represent costs in cost-efficient operations under perfect conditions with no waste or equipment failure.</p> Signup and view all the answers

<p>To understand significant differences and ensure financial performance is on track.</p> Signup and view all the answers

<p>Any variance exceeding £5,000 or more than 15% of the expected cost.</p> Signup and view all the answers

<p>To evaluate growth or decline over a 12-month period.</p> Signup and view all the answers

<p>A flexible budget is updated to reflect current conditions, providing a more accurate comparison.</p> Signup and view all the answers

<p>£70,000</p> Signup and view all the answers

<p>£56,000</p> Signup and view all the answers

<p>£80 favourable</p> Signup and view all the answers

<p>£5,500 unfavourable</p> Signup and view all the answers

<p>Adjusted budget figures of direct materials and direct labour based on actual level of activity and standard costs.</p> Signup and view all the answers

<p>What the company actually spent on direct materials and direct labour.</p> Signup and view all the answers

<p>Labour rate variance</p> Signup and view all the answers

<p>Price variance measures how much more or less you paid for materials compared to what was expected, while quantity variance measures how much more or less materials you used compared to what was expected.</p> Signup and view all the answers

<p>Labour efficiency variance measures how efficiently materials/labour are used in the production process by comparing the expected hours to produce goods with the actual hours used.</p> Signup and view all the answers

<p>The purpose is to help managers focus on specific areas such as controlling material usage or labor hours worked.</p> Signup and view all the answers

<p>Variable overhead spending variance measures the difference between the actual variable overhead costs and the expected costs based on the standard variable overhead rate per unit of cost driver.</p> Signup and view all the answers

<p>The fixed overhead spending variance represents the difference between the actual fixed costs incurred and the budgeted fixed costs.</p> Signup and view all the answers

<p>The variable overhead efficiency variance is calculated as (actual cost driver activity - standard cost driver activity allowed) x standard variable overhead rate per cost-driver unit.</p> Signup and view all the answers

<p>The purpose is to assess how efficiently materials and labor are used in the production process compared to the expected usage.</p> Signup and view all the answers

<p>Variable overhead spending variance is significant as it indicates how much more or less was spent on overhead costs compared to the planned amount.</p> Signup and view all the answers

<p>Variable overhead efficiency variance is calculated as (actual cost driver activity - standard cost driver activity allowed) x standard variable overhead rate per cost-driver unit.</p> Signup and view all the answers

<p>Direct materials flexible budget variance relates to materials used, while direct labour flexible budget variance relates to labor hours worked.</p> Signup and view all the answers