ACCT 361 Lecture Notes - Lecture 7: Pro Rata, Tonne, Standard Streams
Document Summary
Variance - the difference between actual (realized) and budgeted (pro forma) results. Management by exception - the practice of focusing attention on areas not operating as expected (budgeted) Variance analysis - discovering why actual results failed to meet expectations (i. e are greater or less than budget) Is not altered after it is issued even if circumstances change. A budget which is adjusted for changes in the actual level of output or actual revenue and cost drivers. Represent a sensitivity analysis - what the static budget would have looked like if management could have been 100% accurate with regards to the quantity produced and sold. Allows for more meaningful comparisons between (adjusted) budget and actual results. Variable costs will change with change in quantity but fixed costs remain the same. The difference between the actual result and the corresponding static budget amount. This is the highest level of analysis, a super-macro view of operating results, with no detail.
