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Final

# COMM-2016EL Study Guide - Final Guide: Variable Cost

Department
Course Code
COMM-2016EL
Professor
Kayla Levesque
Study Guide
Final

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Budgets â€“ Letâ€™s Get Flexible!
Static Budget â€“ is a boring budget! It is based on only one level of output.
It is not adjusted for volume after it is set. Exampleâ€¦The â€śMaster Budgetâ€ť.
Static Budget â€ś
Varianceâ€ť
â€“ is the difference between the static budget
amount and the actual results!
- the variance is considered â€śfavourableâ€ť if actual
results have a higher operating income than the
static budget showed!
- the variance is â€śunfavourableâ€ť if actual results
show operating income LESS than the static
budget.
Flexible (fun) Budget! â€“ is a budget that is calculated using the budgeted
(standard) revenue and/or cost amounts
based on the level of
output actually achieved!
You use the
budgeted
quantities, &
budgeted
unit prices and
budgeted unit
costs for the actual
amount of finished goods produced and sold!
Flexible Budget Variance â€“ is the difference between the flexible budget
amount and the actual results!
(Hint: note the
static budget variance is the difference between
the â€śstatic budgetâ€ť amount and the actual results!
If there is the term â€śbudgetâ€ť in the variance, then
you calculate the variance by taking the difference
between the â€śbudgetâ€ť (either static or flexible)
and the â€śactualâ€ť results!
Sales Volume Variance â€“ is the difference between the
static budget
and the
flexible budget
amounts. Note the â€śsales volume
varianceâ€ť can apply to both revenue and cost
amounts!
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