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Ch.8_Variance_Inst

Ch.8_Variance_Inst - CHAPTER 8 Planning and Budgeting...

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1 CHAPTER 8 Planning and Budgeting Flexible budgeting and variance analysis
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2 Learning Objectives Prepare a flexible budget Calculate budget variances and identify as favorable / unfavorable Understand factors that might drive budget variances
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3 Budget Variances Originally budgeted values often referred to as standard values A variance is the difference between actual results and the standard (budgeted) value
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4 Variance Analysis Variance analysis is a technique applied to budget data to: Identify problem areas Enhance control Steps in variance analysis Calculate variances Interpret as favorable / unfavorable Investigate causes
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5 Calculating Variances
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6 Simple Variance Analysis Simplest type of variance analysis is comparison of static (standard) budget to actual results Variance is called the Total Variance Total Variance = Actual – Standard (Static budget) Can be calculated for any line item on the budget
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