What Is The Meaning Of A Favorable Budget Variance?

The fixed cost spending variance explains how volume affects fixed cost per unit. The fixed cost spending variance is the difference between the amount of fixed cost shown on the flexible budget and the actual amount of when the actual amount of sales is greater than the budgeted amount of sales, the variance fixed cost. Since fixed costs do not change with volume, the fixed cost spending variance is always equal to zero. Sales mix variance is the difference between a company’s budgeted sales mix and the actual sales mix.

  • At the end of the accounting period actual sales volume was 11,000 units.
  • None of the answers is correct.
  • The standard sales price per unit was lower than the actual price per unit while volume did not change.
  • At the beginning of the accounting period, Nutrition Incorporated estimated that total fixed cost would be $50,600 and that sales volume would be 10,000 units.
  • -overpriced its products.
  • Based on this information Nutrition Multiple Choice -underpriced its products.

Budgeted fixed costs and actual fixed costs. Fixed costs on the static https://business-accounting.net/ budget and fixed costs on a flexible budget based on expected volume.

What Does Sales Price Variance Tell You?

In other words, to make more products you have to use more materials. This variance provides no evidence that the production manager should ledger account be reprimanded. In general variances signal the need for investigation rather than justification to reprimand or reward employees.

Actual fixed costs and controllable fixed costs. The predetermined overhead rate is Multiple Choice -equal to the amount of fixed cost estimated at the end of the accounting period divided by the actual number of units produced. -equal to the amount of fixed cost estimated at the beginning when the actual amount of sales is greater than the budgeted amount of sales, the variance of the accounting period divided by the actual number of units produced. False Explanation An unfavorable materials cost flexible budget variance means that the cost of materials was more than it was expected to be. The production manager may or may not be responsible for this variance.

Total Sales Variance Proof

Sales mix is the proportion of each product sold relative to total sales. A fixed cost spending variance is defined as prepaid expenses the difference between Fixed costs on the static budget and fixed costs on a flexible budget based on actual volume.

when the actual amount of sales is greater than the budgeted amount of sales, the variance

For example, the purchasing agent may have purchased low quality materials. The production department may have had to use excess materials because some of the materials were of such low quality that they had to be scrapped. In general variances signal the need for investigation rather prepaid expenses than evidence of a need to reprimand or reward employees. False Explanation The unfavorable volume variance means that the company produced more products than it expected. If you produce more products than you expected to produce, you would expect materials cost to increase.