Two of the uses of budgets are planning and control. Discuss the possibility of
ID: 2421723 • Letter: T
Question
Two of the uses of budgets are planning and control. Discuss the possibility of a conflict between the two.
When the actual costs are compared to the budgeted costs variances occur. What is a favorable and an unfavorable variance? How can a favorable variance in one are lead to an unfavorable variance in another?
When the actual costs are compared to the budgeted costs variances occur. What is a favorable and an unfavorable variance? How can a favorable variance in one are lead to an unfavorable variance in another?
Explanation / Answer
Planning is related to making plans and control relates to see that the said plans are achieved and if there are any deviations corrections done on time.
conflict can arise when the plans or targets set aside are beyond achievable
Favourable variance is when the actual cost is less than standard cost whereas when the actual costs exceed standared cost there is unfavourable variance.
For Example material variance is comprised of price and quantity . If say we get more quantity at less price then the quantiry variance will be unfavourable but price variance will be more
Planning is related to making plans and control relates to see that the said plans are achieved and if there are any deviations corrections done on time.
conflict can arise when the plans or targets set aside are beyond achievable
Favourable variance is when the actual cost is less than standard cost whereas when the actual costs exceed standared cost there is unfavourable variance.
For Example material variance is comprised of price and quantity . If say we get more quantity at less price then the quantiry variance will be unfavourable but price variance will be more
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