Cost Accounting Exam | Static & Flexible Budgets Explained + Variance Analysis (Favorable & Unfavorable)|Latest Updated 2026 A+ Graded

Cost Accounting Exam | Static & Flexible Budgets Explained + Variance Analysis (Favorable & Unfavorable)|Latest Updated 2026 A+ Graded Static Budget also called a master budget, is based on the budgeted price and budgeted level of output. Also, the static budget is prepared at the beginning of a period Static Budget variance Is the difference from actual output and pricing compared to the budgeted output and pricing A favorable variance results when? is when the actual revenue is greater than the budgeted amounts or actual costs are less than budgeted costs An unfavorable variance results when? if actual revenue is less than budgeted revenue or when costs are greater than budgeted costs What is the 3rd budget that is created? A Flexible Budget What is a flexible budget? A flexible budget adjusts the master budget using actual output to recalculate revenue and variable costs for the budget period. Flexible Budgets compare? Actual output with budgeted prices The three steps for creating a flexible budget is as follows? 1. Identify the actual output quantity 2. calculate flexible budget revenues (budgeted selling price X actual quantity). 3.Calculate flexible budget costs (Budgeted per unit var cost X actual quantity plus fixed costs) Flexiable budgets? accomodate changes in activity levels The sales volume variance is the difference between the? The sales volume variance is the difference between the flexible budget ( at actual out put), and the corresponding Static budget amount. The flexible budget variance is? The flexible budget variance is the difference between the flexible budget Operating income and the actual operating income. The flexible budget variance for revenues is called the? The flexible budget varianc