Variances analysis and budget reconciliation Flashcards
(20 cards)
What is variance analysis?
Variance analysis is the process of comparing actual financial performance to budgeted or planned performance to identify differences and understand their causes.
True or False: Variance analysis can help organizations make informed decisions by identifying areas of financial underperformance.
True
Fill in the blank: The difference between actual costs and budgeted costs is known as __________.
variance
What are the two main types of variances analyzed in variance analysis?
The two main types are favorable variances and unfavorable variances.
Multiple Choice: Which of the following is a purpose of budget reconciliation? A) To prepare financial statements B) To ensure budget compliance C) To increase revenue D) To hire new employees
B) To ensure budget compliance
What is the formula for calculating sales price variance?
Sales Price Variance = (Actual Price - Standard Price) x Actual Quantity
What is the formula for calculating capacity variance?
Capacity Variance = (Actual Hours Worked - Standard Hours Allowed) x Standard Rate
True or False: Capacity variance indicates how efficiently resources are utilized.
True
Fill in the blank: Capacity variance is a measure of the difference between actual output and __________ output.
expected
Which of the following factors can lead to a favorable capacity variance? A) Higher actual output, B) Lower standard costs, C) Reduced workforce.
A) Higher actual output
What does a negative capacity variance indicate?
It indicates that actual hours worked exceeded standard hours allowed.
True or False: A favorable efficiency variance indicates that more resources were used than planned.
False
Fill in the blank: Efficiency variance is calculated as __________.
(Actual hours worked - Standard hours allowed) x Standard rate
Which of the following factors can impact efficiency variance? A) Labor rate changes B) Production volume C) Employee training
All of the above
What does a negative efficiency variance indicate?
A negative efficiency variance indicates that the actual hours worked exceeded the standard hours allowed, leading to inefficiencies.
What is volume variance?
Volume variance is the difference between the expected sales volume and the actual sales volume, multiplied by the standard profit per unit.
What formula is used to calculate volume variance?
Volume Variance = (Actual Volume - Budgeted Volume) x Standard Profit per Unit
Multiple Choice: Which of the following factors can cause volume variance? A) Changes in market demand B) Fixed costs C) Production efficiency D) Employee turnover
A) Changes in market demand
Over Head Absorption Rate formula
Budgeted fixed overhead/budgeted activity
