budget-sec12B_6

Budget-sec12B_6 - Variance Analysis William J Ward Jr MBA Section B How It Is Done 2 Making the Calculations Determine the volume adjustment

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Unformatted text preview: Variance Analysis : William J. Ward, Jr., MBA ¡ Section B How It Is Done 2 Making the Calculations ¡ Determine the volume adjustment ¡ Percent change in volume ¡ Adjust the budget amounts ¡ Calculate “volume adjusted” variances 3 Variance Analysis Formulary ¡ Volume change = Actual – budgeted volume) / budgeted volume ¡ Volume adjustment factor = Volume change x variable expense factor ¡ Labor rate variance = (Budgeted rate – actual rate) x volume adjusted hours budget ¡ Efficiency variance = (Volume adjusted hours budget – actual hours) x actual pay rate 4 The Variable Expense Factor ¡ The proportion of the item being analyzed that varies with business volume ¡ Total of budget being analyzed $100,000 ¡ Variable items within that budget $ 60,000 ¡ Variable expense factor = 60,000/100,000 = 60% 5 SALARY VARIANCE ANALYSIS Actual Volume: 120,000 Budget Volume: 140,000 Variable Expense Factor: 75.00% Volume Change Factor:-14.29% Volume Adjustment Factor:-10.71% Salary Variance Analysis 6 SALARY VARIANCE ANALYSIS Actual Volume: 120,000 Budget Volume: 140,000 Variable Expense Factor: 75.00% Volume Change Factor:-14.29% Volume Adjustment Factor:-10.71% Variance Description Actual Budget (Unfavorable)---------------------------------------------------------- Salaries $457,600 $474,240 $16,640 Vol. Adj. (50,811) ($50,811)--------------------------------------- $457,600 $423,429 ($34,171) Salary Variance Analysis Variance Analysis : William J. Ward, Jr., MBA ¡ 7 SALARY VARIANCE ANALYSIS Actual Volume: 120,000 Budget Volume: 140,000 Variable Expense Factor: 75.00% Volume Change Factor:-14.29% Volume Adjustment Factor:-10.71% Variance Description Actual Budget (Unfavorable)---------------------------------------------------------- Salaries $457,600 $474,240 $16,640 Vol. Adj. (50,811) ($50,811)--------------------------------------- $457,600 $423,429 ($34,171) Hours 41,600 39,020 (2,580) Vol. Adj. (4,181) (4,181)--------------------------------------- 41,600 34,839 (6,761) Labor Rate $11.00 $12.15 $1.15 Salary Variance Analysis 8 SALARY VARIANCE ANALYSIS Actual Volume: 120,000 Budget Volume: 140,000 Variable Expense Factor: 75.00% Volume Change Factor:-14.29% Volume Adjustment Factor:-10.71% Variance Description Actual Budget (Unfavorable)---------------------------------------------------------- Salaries $457,600 $474,240 $16,640 Vol. Adj. (50,811) ($50,811)--------------------------...
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This note was uploaded on 01/29/2012 for the course PH 551.603 taught by Professor / during the Spring '12 term at Johns Hopkins.

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Budget-sec12B_6 - Variance Analysis William J Ward Jr MBA Section B How It Is Done 2 Making the Calculations Determine the volume adjustment

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