BUAD 281 Lecture Notes - Lecture 20: Income Statement
27 Apr 2017
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The flexible budget & variance analysis: budgetary control, a major function of management is to control operations. Managers analyze differences between actual and planned results and determine causes. The difference between the planning (static) budget and the flexible budget is called an activity variance or a. One department is responsible for the acquisition of a resource and determining the actual price. A different department uses the resource and determines how efficiently it is used: a variance is a signal that is part of a control system for monitoring results. Standard quantity is the amount of input that should have been used to produce the actual output of the period. (remember: our starting point is the flexible. Essentially, standard quantity=expected quantity per unit x*# of units sold: standard cost of actual inputs: standard price*actual quantity. Standard price is the amount that should have been paid for each unit of input used: actual results: actual price*actual quantity.
