BU247 Lecture 10: Bu247 lecture 10
Document Summary
Second level variances: (1) planning variance, (2) flexible budget variance. The flexible budget variance is broken to more specific variances (third level) Third level variance: (3) efficiency variances (dm efficiency variance (called dm quan v), dl. Third level variance: (4) price variance (dm price variance, dl price variance (called dl rate v) = Third-level: the flexible budget variances is that we identify price (rate) and quantity (efficiency) variances for materials, labour, and variable manufacturing overhead. We also have the sales price and the fixed costs variances. Help managers explain the difference between the actual income and the static budget income by focusing exclusively on the variation in the sales volume flexible budget variance (standard effect) Helps managers identify all the other causes of this first-level variance. Compares the two income statements the actual results vs the flexible budget results (that both use the actual unit sales.
