notes-c11 - C 11 - FLEXIBLE BUDGETS AND OVERHEAD ANALYSIS...

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1 C 11 - FLEXIBLE BUDGETS AND OVERHEAD ANALYSIS notes-c11.doc Written by Professor Gregory M. Burbage, MBA, CPA, CMA, CFM © CHAPTER LEARNING OBJECTIVES: MAJOR: - Calculate all variances (also see chapter 10 notes). - Explain what each variances means in non-technical language (also see chapter 10 notes). - Prepare a flexible budget. STATIC BUDGET has one level of activity. When comparing an original static budget with actual results, you can't distinguish between cost control and activity control. I.e., you can't tell if you have a favorable or unfavorable Price Variance and a favorable or unfavorable Quantity Variance. FLEXIBLE BUDGET is several budgets at various levels of activity. In fact, after the activity level is determined (after the fact) we will prepare a new flexible budget at the actual activity level achieved (if we didn't already have one). Then we will calculate our variance analysis comparing the revised flexible budget and actual results, so as to determine the Price and Quantity Variances.
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notes-c11 - C 11 - FLEXIBLE BUDGETS AND OVERHEAD ANALYSIS...

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