COB 242 Quiz: ch. 8, 9, 10 quiz prep

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College of Business
COB 242
Sandra Cereola

Ch. 9: Flexible Budgets & Performance Analysis Some cost (variable and mixed) should be different from what is shown in planning budget Planning budget not used to access performance Flexible Budget: shows what revenues & costs should have been for the actual level of activity in the period  Fixed component + variable component * level of activity Difference between flexible budget & planning budget = activity variance Unfavorable: flex. Budget cost > plan. Budget cost Favorable: flex budget cost < plan budget cost Higher Activity  Higher Profit and Higher costs Flexible Budget & Actual Budget  Revenue and Spending Variance Planning Budget & Flexible Budget  Activity Variance Static budgets: only one level of activity Not realistic for other levels of activity (especially is Variable Costs are significant) Actual Costs & Budgeted Costs: will differ because: 1. Actual level of activity differs from budgeted 2. Use of resources by manager Variances Template (Actual Hours * Actual Rate) (Actual Hours * Standard Rate) (St. Hours * St. Rate) Rate Variance Efficiency Variance AQ (SP – AP)
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