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Lecture Notes for ACCT 4540 - Cost Acct II at Wyoming (UW)

Notes Information

Material Type:Class Note
Professor:Staff
Class:ACCT 4540 - Cost Acct II
Subject:Accounting
University:University of Wyoming
Term: 2005
Keywords:
  • Flexible Budget
  • Revenue Variance
  • Static Budget
  • Budget Variance
  • Sales Volume Variance
  • Price Variance
  • Flexible Budget Variance
  • Standard Quantity
  • Efficiency Variance
  • Interdependencies
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Sample Document Text

CHAPTER 7 FLEXIBLE BUDGETS, DIRECT-COST VARIANCES, AND MANAGEMENT CONTROL 7-1 Management by exception is the practice of concentrating on areas not operating as expected and giving less attention to areas operating as expected. Variance analysis helps managers identify areas not operating as expected. The larger the variance, the more likely an area is not operating as expected. 7.2 Two sources of information about budgeted amounts are (a) past amounts and (b) detailed engineering studies. 7.3 A favorable variance––denoted F––is a variance that has the effect of increasing operating income relative to the budgeted amount. An unfavorable variance––denoted U––is a variance that has the effect of decreasing operating income relative to the budgeted amount. 7.4 The key difference is the output level used to set the budget. A static budget is based on the level of output planned at the start of the budget period. A flexible budget is developed using budgeted revenues or co...

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