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budget-sec12B_6 - Variance Analysis William J Ward Jr MBA...

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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
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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.
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