ACC 222 Chapter Notes - Chapter 9: Earnings Before Interest And Taxes
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8 Jan 2017
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Planning budget- a budget created at the beginning of the budgeting period that is valid only for the planned level of activity. If activity is higher than expected, variable costs should be higher than expected; and if activity is lower than expected, variable costs should be lower than expected. Flexible budget- a report showing estimates of what revenues and costs should have been, given the actual level of activity for the period. A flexible budget approach recognizes that a budget can be adjusted to show what costs should be for the actual level of activity. Activity variances- the difference between a revenue or cost item in the flexible budget and the same item in the static planning budget. An activity variance is due solely to the difference between the actual level of activity used in the flexible budget and the level of activity assumed in the planning budget.
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