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10 Cards in this Set
- Front
- Back
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ProfitPlan variances |
–Budgeted,flex, and actual income]M |
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Effectivenessvariances |
–MarketShare, Market Size (Together,make up sales volume variance) –SalesQuantity, Sales Mix (Together,make up sales volume variance –SalesPrice |
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Efficiencyvariances |
–Inputprice and quantity for variable inputs –Non-variableinputs (fixed costs) |
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Strategic learning |
What was the effect of a particularaction on profit? |
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Why Use Variances? |
Helpsus understand how certain actions impact profitabilityand overall strategy Strategic Learning Early warning and corrective action Performance Evaluation |
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Early warning and corrective action |
Something is wrong…why is it wrong? |
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Performance evaluation |
Didmanager or division performance meet expectations? |
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Evaluating performance ofthe “profitwheel” byusing variancesrequires: |
Measuring inputs, processes, and outputs Presence of predetermined standards Using variances as feedback and adjustments |
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Interpreting Variances |
Deductive approach: havea theory and then think about which variances would provide evidence for andagainst the theory Inductiveapproach:Look at variances and follow up on those that are out of control. |
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Budget (Profit Plan) Variance |
actual income statement flexible budget static budget
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