COMMERCE 2AB3 Study Guide - Cost Driver, Greece Runestones, Earnings Before Interest And Taxes

• School: McMaster University
• Department: Commerce
• Course: COMMERCE 2AB3
• Professor: Aadil Merali Juma

Document Summary

The master budget is one type of flexible budget. A flexible budget is calculated at the start of the budget period. A flexible budget is calculated at the end of the budget period when actual output is known. Information regarding the causes of variances is provided when the master budget is compared with actual results. Little information regarding the causes of variances is provided when the master budget is compared with actual results because you are comparing a budget for one level of activity with actual costs for a different level of activity. A favorable variance results when budgeted revenues exceed actual revenues. An unfavorable variance results when budgeted revenues exceed actual revenues. 1: management by exception is the practice of concentrating on areas not operating as anticipated (such as a cost overrun) and placing less attention on areas operating as anticipated. The essence of variance analysis is to capture a departure from what was expected.