Chapter 23, Problem 7E

To determine

Introduction:

Budgeting is an estimation concept regarding future course action. The management of a company is attempting to predict the future based historical or market information available. Based on the information available, a standard performance is determined whether it is related to quantity or cost. A fixed budget is prepared based on the projected sales or production and standard cost predetermined by the management. The budget is which is prepared based on the actual level of activity is called a flexible budget. After the occurrence of activity whether it is production or sale, the projected results estimated is compared with the actual results to determine various variances like price, quantity, cost, rate, efficiency, volume variances etc.

To match:

Match the terms preceded by letter a through j with the definitions listed from 1 through 10

Given:

Definitions:

1. The difference between actual and budgeted sales or cost caused by the difference between the actual price per unit and the budgeted price per unit.

2. A planning budget based on a single predicted amount of sales or production volume; unsuitable for evaluations if the actual volume differs from the predicted volume.

3. Preset costs for delivering a product, component, or service under normal conditions.

4. A process of examining the differences between actual and budgeted sales or costs and describing them in terms of the amounts that resulted from price and quantity differences.

5. The differences between the total budgeted overhead cost and the overhead cost that was allocated to products using the predetermined fixed overhead rate.

6. A budget prepared based on predicted amounts of revenues and expenses corresponding to the actual level of output.

7. The differences between actual and budgeted cost caused by the difference between the actual quantity and the budgeted quantity.

8. The combination of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance.

9. A management process to focus on significant variances and give less attention to areas where performance is close to the standard.

10. The difference between actual cost and standard cost, made up of a price variance and a quantity variance.