Question

Matching terms [10 min]

Consider the following terms:

a. Flexible Budget

b. Flexible Budget Variance

c. Sales Volume Variance

d. Static Budget

e. Variance

Consider the following definitions:

——— 1. A summarized budget for several levels of volume that separates variable costs from fixed costs.

——— 2. The budget prepared for only one level of sales volume.

——— 3. The difference between an actual amount and the budget.

——— 4. The difference arising because the company actually earned more or less revenue, or incurred more or less cost, than expected for the actual level of output.

——— 5. The difference arising only because the number of units actually sold differs from the static budget units.

Requirement

1. Match each term to the correct definition.

Answer 1

Answer: See explanation

Step-by-step explanation:

1. Flexible budget

A flexible budget is referred to as a budget that adjusts with the changes in volume.

2. Static budget

This is the budget that's prepared for just one sales volume level.

3. Variance

The difference between an actual amount and the budget is referred to as the variance.

4. Flexible budget variance

Flexible budget variance is the difference between the actual results that are gotten and the results that are gotten through the flexible budget model.

5. Sales volume variance

This is the difference between the actual units that are sold and the expected number of units that are sold, which is then multiplied by budgeted price per unit.