Variance Analysis
Variance Analysis
| Name: | Assignment: | ||
| A good budget is built with thoughtful consideration of future costs and revenue. Though your budget is formulated with expected figures in mind, the actual resulting values may vary considerably. This variance–from projected to actual–can be a pleasant surprise or a fiscal nightmare and can make financial decision making difficult. Fortunately, variance analysis can enable management to determine why variance occurred and what can be done to mitigate its effects. | |||
| Using the following performance data, calculate the volume adjusted labor rate variance and volume adjusted efficiency variance. Your Variable Expense Factor is 40% and your Volume Change Factor is 50% | |||
| Actual | Budget | ||
| Salaries | 345,000 | 413,000 | |
| Payroll Hours | 11,000 | 9,500 | |
| Service Volume | 75,000 | 150,000 | |
| Actual | Budget | . | |
| Salaries | 345,000 | 413,000 | |
| Payroll Hours | 11,000 | 9,500 | |
| Service Volume | 75,000 | 150,000 | |
| Actual Volume | 75,000 | ||
| Budget Volume | 150,000 | ||
| Variable Expense Factor | 40% | ||
| Volume Change Factor | -50% | ||
| Volume Adjustment Factor | -20% | ||
| Description | Actual | Budget | Variance (Unfavorable) |
| Salaries | 345,000 | 413,000 | 68,000 |
| Volume Adjustment | |||
| Volume Adjusted Salaries | |||
| Paid Hours | |||
| Volume Adjustment | |||
| Volume Adjusted Hours | |||
| Labor Rate | |||
| Labor Rate Variance | $0.00 | ||
| Efficiency Variance | $0.00 | ||
| Total Variance | $0 | ||
| For this Assignment, run a variance analysis. Based on the information you obtain,assess the results of the analysis, suggest potential causes of the budget variances and an explanation for addressing the situation. | |||
| Answer: |
