ECONOMICS

COST ACCOUNTING

FLEXIBLE BUDGETS

 Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
A static budget variance is the difference between
 A actual results and the expected results in the flex budget B master budget results and the expected results in the static budget C actual results and the expected results in the master budget
Explanation:

Detailed explanation-1: -The flexible budget variance is the difference between the actual results and the expected results in the flexible budget for the actual units sold. A flexible budget is a type of budget that changes based on the level of volume or activity such as the number of units sold.

Detailed explanation-2: -What are static budgets and static-budget variances? A static budget is based on the level of output planned at the start of the budget period. The static-budget variance is the difference between the actual result and the corresponding budgeted amount in the static budget.

Detailed explanation-3: -1. Static Budget Variance: The difference between the actual results and the static budget. 2. Sales Volume Variance: The difference between the flexible budget and the static budget. These variances are used to assess whether the differences were favorable (increased profits) or unfavorable (decreased profits).

Detailed explanation-4: -Static Budget-the budget is prepared for only one level of production volume. Also called a Master budget. Flexible Budget-a summarized budget that can easily be computed for several different production volume levels. Separates variable costs from fixed costs.

Detailed explanation-5: -The difference between the actual results and the static budget is called the static budget variances. It does not allow the changes in the level of activity that is incorrect. It is adjusted for the actual level of production and is not suited for performance measurement.

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