Chapter_9_Presentation_Study_Aid_Slides

Variance Analysis Cycle

A systematic approach to analyzing the differences between planned financial outcomes and actual financial outcomes.

Flexible Budget

A budget that adjusts for changes in activity levels, allowing for a more accurate evaluation of performance.

Planned Budget

A budget prepared for a single, predetermined level of activity.

Actual Results

The real financial outcomes achieved after a specific time period, compared to planned budgets.

Static Budget

A budget that remains unchanged regardless of actual activity levels.

Favorable Variance (F)

Occurs when actual costs are less than budgeted costs or when actual revenue exceeds budgeted revenue.

Unfavorable Variance (U)

Occurs when actual costs are greater than budgeted costs or when actual revenue is less than budgeted revenue.

Activity Variance

The difference arising from the change in the actual level of activity versus the level included in the planning budget.

Spending Variance

The difference between actual costs incurred and the flexible budget costs based on the actual activity level.

Revenue Variance

The difference between actual revenue and flexible budget revenue.

Cost Control

The practice of managing costs to stay within budget goals.

Multiple Cost Drivers

Factors that can affect costs in a budget that may need to be considered for accurate budgeting forecasts.

Relevant Range

The range of activity within which their assumptions about variable and fixed costs hold true.

Performance Report

A report that combines revenue and spending variances to evaluate performance against the budget.