Budget Variance

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Budget variance is an integral part of the ‘Costing Introduction Free Course’ and Accounting Trainees need a good understanding of budgets and variances.

You are part way through the ‘Costing Introduction Free Course’ and before reading this page you should have read:
-Costing Introduction Free Course
-Costing Systems
-Cost Centres and Cost Behaviour
-Inventory Valuation
-Labour Costs

An important job of an Accounting Trainee is to provide information to managers who need to plan and make decisions for the business. You can see at this point in your studies that we are moving away from the role of the bookkeeper, and more towards the role of the trainee/management side.

Rather than waiting for a request for information a good Accounting Trainee will have given much thought as to what information managers need. Make your self indispensable by meeting the information needs of managers and ensuring that the information must is timely, relevant and accurate.

A major part of the information process is the planing and preparation of budgets.

The Accounting Trainee examiner will expect you to explain how budgets are prepared, monitored and how they are used to control costs.

You will be required to calculate and explain some basic variances, and state whether they are adverse or favourable.


Another popular topic with Accounting examiners is that you should be able to calculate, report and explain as to what is meant by significant variances.

Below is the Amazon link to the relevant books covering budget variance:



Now lets test your knowledge of budget variance – please attempt the quiz below.

Budget Variance : QUIZ

 

Question 1
The difference between the actual data and the budgeted data is known as a ___________

Question 2
Variances can be favourable or __________

Question 3
Managers will not be interested in all varianes only the ___________ ones



Question 4
If actual labour costs are higher than budgeted labour costs the variance is adverse – true or false

Question 5
A business has a significant adverse variance for direct material, which two managers should be informed?

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