Question

Matching terms

Match each term to the correct definition.

Terms Definitions

a. Flexible budget

b. Flexible budget variance

c. Sales volume variance

d. Static budget

e. Variance

1. A summarized budget for several levels of volume thatseparates variable costs from fixed costs.

2. A budget prepared for only one level of sales.

3. The difference between an actual amount and thebudgeted amount.

4. The difference arising because the company actuallyearned more or less revenue, or incurred more or lesscost, than expected for the actual level of output.

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

Short answer

	Terms	Definitions
a	Flexible budget	A summarized budget prepared for different levels of volume
b	Flexible budget variance	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.
c	Sales volume variance	The difference arising only because the number of units actually sold differs from the static budget units.
d	Static budget	A budget prepared for only one level of sales.
e	Variance	The difference between an actual amount and the budgeted amount.

Step-by-step solution

Step 1:

Flexible budgets engage business visionaries to adapt to change. This nimble planning process allows to adjust spending throughout the year; benefits incorporate more opportunities, less overspending, and speedier responses to changing business and market conditions.

Step 2:

Flexible budget variance is any distinction between the outcomes generated by a flexible budget and actual outcomes.If actual revenues are embedded into a flexible budget , this implies that any variance will arise between budgeted and actual expenses, not incomes.

Step 3:

Sales volume variance is the distinction between the expected and actual number of units sold, multiplied by the budgeted price of per unit.

Step 4:

Static budget is a budget that expects a fixed amount in sales, expenses, and revenue. Static budgets can remain unaltered, or fixed, in an organisation's financial records regardless of fluctuations in income volume.

Step 5:

Variance is the distinction between a budgeted or planned expense and the actual amount incurred/sold. Variances can be calculated for both expenses and revenues.