Class notes
ACC 3200 Chapter 9 Notes
- Course
- Cost Accounting
- Institution
- Baruch College
This is a comprehensive and detailed note on Chapter 9;flexible budgets and performance analysis for Acc 3200.
[Show more]
Content preview
Chapter 9 flexible budgets and performance analysisVariance Analysis Cycle
Learning Objective 1
Prepare a planning budget and a flexible budget with one cost driver.
Characteristics of Flexible Budgets: Part 1
Planning budgets are prepared for a single, planned level of activity.
Performance evaluation is difficult when actual activity differs from the planned level of activity.
Characteristics of Flexible Budgets:
Part 2
1. May be prepared for any activity level in the relevant range.
2. Show costs that should have been incurred at the actual level of activity, enabling “apples to
apples” cost comparison.
3. Help managers control costs.
4. Improve performance evaluation.
Deficiencies of the Static Planning Budget: Part 1
Larry’s Lawn Service provides lawn care in a planned
community where all lawns are approximately the same size. At the end of May, Larry prepared his June
budget based on mowing 500 lawns. Since all of the lawns are similar in size, Larry felt that the number
of lawns mowed in a month would be the best way to measure overall activity for his business.
Static or Master Budget is based on one scenario
Deficiencies of the Static Planning Budget: Part 2
Deficiencies of the Static Planning Budget: Part 3
Deficiencies of the Static Planning Budget: Part 4
Deficiencies of the Static Planning Budget: Part 7
, At this point, we cannot answer this question because the actual level of activity is greater than the
planned level of activity. Therefore, actual variable costs are likely to be higher than planned variable
costs regardless of Larry’s managerial efficiency.
Deficiencies of the Static Planning Budget: Part 8
The relevant question is . . .
“How much of the cost variances are due to higher activity and how much are due to cost control?”
To answer the question, we need to flex the planning budget to accommodate the actual level of activity.
How a Flexible Budget Works:
Part 1
To flex a budget, we need to know that:
Total variable costs change in direct proportion to changes in activity.
Total fixed costs remain unchanged within the
relevant range.
How a Flexible Budget Works:
Part 2
Preparing a Flexible Budget
Quick Check 1
What should the total wages and salaries cost be in a flexible budget for 600 lawns?
a. $18,000.
b. $20,000.
c. $23,000.
d. $25,000.
Learning Objective 2
Calculate and interpret activity variances.
Activity Variances: Part 1
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller anyiamgeorge19. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $10.99. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
75632 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now