ACCT 202 Chapter 21: Acct Chapter 21

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Management uses budgets to monitor and control operations. Compare actual with budget and analyze any differences. Prepared for a single planned level of activity. Performance evaluations can be difficult when the actual level of activity differs from planned level. Shoe revenues and expenses that should have occurred at the actual level of activity. May be prepared for any activity level in the relevant range. Reveal variances due to good cost control or lack of cost control. The flex a budget for different activity levels, we must know how costs behave with changes in activity levels. Total variable costs change in direct proportion to changes in activity. Total fixed costs remain unchanged within the relevant range. Total variable cost = . 80 per unit * budget level in units. Fixed costs are expressed as a total amount that does not change within the relevant range of activity. Favorable sales variance indicates that the average selling price was greater that.

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