Flexible Budgets Fixed budgets are estimates of costs and expenses of fixed and variable nature for a predetermined level of activity or volume of manufacture. Flexible Budgets are estimates of costs and expenses fixed and variable nature that are adjusted or modified to accommodate varying levels of activity. The flexible budget allows for comparative analysis and cost estimation for different levels of manufacturing activity. It does so by allowing the cost components that are variable in nature to be adjusted depending upon the level of activity, and the fixed costs remain the same regardless of level of activity. Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced. Examples are costs of direct material and direct labor. Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced. Examples are costs of factory rent, depreciation on plant and equipment. These costs have to be borne regardless of volume of production. To Determine: Flexible Budget Report for 18000 units of sales.

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Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

Chapter 23, Problem 2APSA

1)

To determine

Introduction:

Flexible Budgets

Fixed budgets are estimates of costs and expenses of fixed and variable nature for a predetermined level of activity or volume of manufacture. Flexible Budgets are estimates of costs and expenses fixed and variable nature that are adjusted or modified to accommodate varying levels of activity.

The flexible budget allows for comparative analysis and cost estimation for different levels of manufacturing activity. It does so by allowing the cost components that are variable in nature to be adjusted depending upon the level of activity, and the fixed costs remain the same regardless of level of activity.

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced. Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced. Examples are costs of factory rent, depreciation on plant and equipment. These costs have to be borne regardless of volume of production.

To Determine:

Flexible Budget Report for 18000 units of sales.

2)

To determine

Introduction:

Variance Analysis

Variances are the difference between the budgeted values and actual values of the cost and revenue items and are analyzed for components of direct and indirect costs.

In case of costs, the change is deemed unfavorable if the actual costs exceed the budgeted costs and the change is deemed favorable if the actual costs do not exceed the budgeted costs.

In case of revenues, the change is deemed favorable if the actual revenues exceed the budgeted revenues and the change is deemed unfavorable if the actual revenues are less than the budgeted revenues. Examples of the Variance Analysis metrics include:

Sales Variance − It is a measure of the sales revenues actually received as well as the units of goods actually sold against budgeted sales revenues and estimated goods that will be sold.

A favorable variance indicates higher revenue as well as greater profitability and an unfavorable variance indicates reduced revenues and has an adverse impact on profitability.

Sales Variance = ( Budgeted Quantity Sold x Budgeted Sales Price ) - (Actual Quantity Sold x Actual Sales Price)

Direct Material Cost Variance - It is a measure of the Costs of direct materials actually purchased budgeted goods that will be purchased.

A favorable variance indicates lower costs as well as greater profitability and an unfavorable variance indicates higher costs and has an adverse impact on profitability.

Materials Price Variance = (Budgeted Price x Actual Quantity Purchased) - (Actual Price x Actual Quantity Purchased)

To Determine:

Sales Variance and Material Variance and its analysis.

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Answer 2

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Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

Chapter 23, Problem 2APSA

1)

To determine

Introduction:

Flexible Budgets

Fixed budgets are estimates of costs and expenses of fixed and variable nature for a predetermined level of activity or volume of manufacture. Flexible Budgets are estimates of costs and expenses fixed and variable nature that are adjusted or modified to accommodate varying levels of activity.

The flexible budget allows for comparative analysis and cost estimation for different levels of manufacturing activity. It does so by allowing the cost components that are variable in nature to be adjusted depending upon the level of activity, and the fixed costs remain the same regardless of level of activity.

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced. Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced. Examples are costs of factory rent, depreciation on plant and equipment. These costs have to be borne regardless of volume of production.

To Determine:

Flexible Budget Report for 18000 units of sales.

2)

To determine

Introduction:

Variance Analysis

Variances are the difference between the budgeted values and actual values of the cost and revenue items and are analyzed for components of direct and indirect costs.

In case of costs, the change is deemed unfavorable if the actual costs exceed the budgeted costs and the change is deemed favorable if the actual costs do not exceed the budgeted costs.

In case of revenues, the change is deemed favorable if the actual revenues exceed the budgeted revenues and the change is deemed unfavorable if the actual revenues are less than the budgeted revenues. Examples of the Variance Analysis metrics include:

Sales Variance − It is a measure of the sales revenues actually received as well as the units of goods actually sold against budgeted sales revenues and estimated goods that will be sold.

A favorable variance indicates higher revenue as well as greater profitability and an unfavorable variance indicates reduced revenues and has an adverse impact on profitability.

Sales Variance = ( Budgeted Quantity Sold x Budgeted Sales Price ) - (Actual Quantity Sold x Actual Sales Price)

Direct Material Cost Variance - It is a measure of the Costs of direct materials actually purchased budgeted goods that will be purchased.

A favorable variance indicates lower costs as well as greater profitability and an unfavorable variance indicates higher costs and has an adverse impact on profitability.

Materials Price Variance = (Budgeted Price x Actual Quantity Purchased) - (Actual Price x Actual Quantity Purchased)

To Determine:

Sales Variance and Material Variance and its analysis.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 3

Question

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

Chapter 23, Problem 2APSA

1)

To determine

Introduction:

Flexible Budgets

Fixed budgets are estimates of costs and expenses of fixed and variable nature for a predetermined level of activity or volume of manufacture. Flexible Budgets are estimates of costs and expenses fixed and variable nature that are adjusted or modified to accommodate varying levels of activity.

The flexible budget allows for comparative analysis and cost estimation for different levels of manufacturing activity. It does so by allowing the cost components that are variable in nature to be adjusted depending upon the level of activity, and the fixed costs remain the same regardless of level of activity.

Variable costs refer to the costs of manufacture that have a direct co-relation with the volume of the goods manufactured, i.e. the costs increase with an increase in the goods produced. Examples are costs of direct material and direct labor.

Fixed costs refer to the costs of manufacture that have an inverse co-relation with the volume of the goods manufactured, i.e. the costs decrease with an increase in the goods produced. Examples are costs of factory rent, depreciation on plant and equipment. These costs have to be borne regardless of volume of production.

To Determine:

Flexible Budget Report for 18000 units of sales.

2)

To determine

Introduction:

Variance Analysis

Variances are the difference between the budgeted values and actual values of the cost and revenue items and are analyzed for components of direct and indirect costs.

In case of costs, the change is deemed unfavorable if the actual costs exceed the budgeted costs and the change is deemed favorable if the actual costs do not exceed the budgeted costs.

In case of revenues, the change is deemed favorable if the actual revenues exceed the budgeted revenues and the change is deemed unfavorable if the actual revenues are less than the budgeted revenues. Examples of the Variance Analysis metrics include:

Sales Variance − It is a measure of the sales revenues actually received as well as the units of goods actually sold against budgeted sales revenues and estimated goods that will be sold.

A favorable variance indicates higher revenue as well as greater profitability and an unfavorable variance indicates reduced revenues and has an adverse impact on profitability.

Sales Variance = ( Budgeted Quantity Sold x Budgeted Sales Price ) - (Actual Quantity Sold x Actual Sales Price)

Direct Material Cost Variance - It is a measure of the Costs of direct materials actually purchased budgeted goods that will be purchased.

A favorable variance indicates lower costs as well as greater profitability and an unfavorable variance indicates higher costs and has an adverse impact on profitability.

Materials Price Variance = (Budgeted Price x Actual Quantity Purchased) - (Actual Price x Actual Quantity Purchased)

To Determine:

Sales Variance and Material Variance and its analysis.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Answer 4

Question

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

Chapter 23, Problem 2APSA

1)

To determine