AC100_Lecture7-8_COMPLETE LECTURE SLIDES.pdf

Flexible budget variance 1850000 1800000 50000 f

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Flexible budget variance = 1,850,000- 1,800,000 = 50,000 F 1,800,000 2,160,000 Flexible budget variance (budgeted) 10000 (actual) Static- budget variance
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Flexible-budget variance: Variable cost 10000 12000 Cost driver [Units sold] 1,120,000 Actual variable cost = 1,120,000 Budgeted variable cost per unit = Flexible budget variable cost = Flexible budget variance = 1,188,000 (actual) (budgeted) [ ] Static-budget variance
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Flexible-budget variance: Variable cost 10000 12000 Cost driver [Units sold] 1,120,000 990,000 Actual variable cost = 1,120,000 (must be 112/unit) Budgeted variable cost per unit = 1,188,000 / 12,000 = 99 Flexible budget variable cost = 99 * 10,000 = 990,000 Flexible budget variance = 1,120,000- 990,000 = 130,000 U 1,188,000 Flexible budget variance (actual) (budgeted) [ ] Static-budget variance
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Sales volume profit (contribution) variance The sales volume profit variance measures the variance in expected profit as a result of the sales volume being higher or lower than budgeted (flexible). If multiplied by Std. contribution/unit then it is called Sales volume contribution variance Sales volume profit variance = (Budgeted sales volume - Actual sales volume) x standard profit/unit Emphasises that it measures the change in standard profit caused by the change in sales volume.
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Flexible budget-based variance analysis of operating profit Sales volume profit variance
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Flexible budget-based variance analysis of operating profit !
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Flexible budget-based variance analysis of operating profit 10000 12000 Revenue and cost driver [Units sold] 100,000 25,000 262,000 Total sales volume profit variance 162,000 U Total flexible-budget variance 75,000 U Total static-budget variance 237,000 U (actual) (budgeted) [ ]
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3 levels of variance analysis Actual Static budget Sales volume variance Flexed budget: budgeted standards adjusted for actual volume Price variance Efficiency variance Static-budget variance Flexible budget variance Level 1 Level 2 Level 3 ( For input factors )
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Level 1 and level 2 variances Static budget variance = Actual results - Static budget amount Actual unit price × Actual quantity of inputs - Standard unit price × Standard quantity of inputs for budgeted output Flexible budget variance = Actual results - Flexed budget amount = Actual unit price × Actual quantity of inputs - Standard unit price × Standard quantity of inputs for actual output ‘flexed’ quantity
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Level 3: Price and efficiency variances Price and efficiency variances are concerned with the actual and budgeted prices and quantities of inputs (such as direct materials purchased or used ) . Efficiency variance = ( Actual quantity of inputs - Standard quantity of inputs for actual output ) × Standard unit price Price variance = ( Actual unit price - Standard unit price ) × Actual quantity of inputs ‘flexed’ quantity
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