![]() ![]() If there is a large flexible budget variance, it may mean that the formulas inserted into the budget model should be adjusted to more accurately reflect actual results. Production volume variance helps corporate managers. In general, the total flexible budget variance should be smaller than the total variance that would be generated if a fixed budget model were used, since the unit volume or revenue level in a flexible budget model is adjusted to match actual results (which is not the case in a fixed budget model). Production volume variance is a statistic that measures the overhead amount that is applied to the actual number of units of a product produced. If you calculate SV and the value is positive, you are. If the number of actual units sold is inserted into a flexible budget model, there can then be variances between the standard revenue per unit and the actual revenue per unit, as well as between the actual and budgeted expense levels. The only difference is the analysts preference for the verbiage. In budgeting, and management accounting in general, a variance is the difference between a budgeted, planned, or standard cost and the actual amount. ![]() The only comlexity arises when adding the SD of a set of activities. ![]() This of course uses the PM forula for SD which is P-O/6. Despite that omission, activity variance has a nice easy formula, it's just SD 2. If actual revenues are inserted into a flexible budget model, this means that any variance will arise between budgeted and actual expenses, not revenues. PMP MATH Activity Variance You will not find activity variance in the PMBOK. Typically, actual revenues or actual units sold are inserted into a flexible budget model, and budgeted expense levels are automatically generated by the model, based on formulas that are set at a percentage of sales.Ī flexible budget variance is any difference between the results generated by a flexible budget model and actual results. Efficiency variance is the difference between the theoretical amount of inputs required to produce a unit of output and the actual number of inputs used to produce the unit of output. A flexible budget is a budget that shows differing levels of revenue and expense, based on the amount of sales activity that actually occurs. ![]()
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