PLEASE REPLY TO EACH CLASSMATE. PLEASE BE SURE TO MAKE THE REPLY PERSONABLE.
BSM
310
New Post by Bryanna Young
When budgeting and budgeting analysis, standards and variances are
very important. A budget represents a business owner’s expectations of the
revenue and costs included with that budgeting period. Variances are either the
price variances or quantity variances. Price variances are when the selling or buying
price was not what management wanted it to be during that period. The selling
price variance is the difference in selling price and the actual price.
Quantity variances come into play when a different number of materials, labor,
or overheard is needed than expected when manufacturing an item.
Analyzing how significant all of these variances are the next step
in this process. When investigating these variances, a company has a policy to
investigate them if they are 10 percent more than what the budget provides.
Determining the root cause of the variances is very important so managers will
ask employees or managers to help determine. Once the issue is determined, the
next step is finding out if it was a temporary issue or if its more permanent.
This will then determine what changes need to be made to the budgets.
New Post by Jacob Outlaw
Variances are commonly used when budgeting and
conducting budget analysis. Variances are usually dealing with the price or
quantity of something. The price variance is considered when the price of
something is not constantly the same. Quantity variance is the combination of
all labor, materials, and overhead items that are needed. These two factors
greatly change how much a standard budget will be and are extremely important
when figuring out the final price for the budget. Budget analysis is the
understanding of all variable costs and determining how much room to leave for
extra costs. Budget analysis is crucial when creating the budget since the
managers must create a budget based on the unexpected costs of the future.
Managers will try and figure out the future price variances based on trends.
(Henderson, 2012) Quantity variance is tricky, and managers will need to
understand how much production will be made during the budgeting period.
Resource:
Henderson, L.
(2012). Managing Budgets in Complex Times with Tight Variances. Applied
Clinical Trials, 21(7), 16-16,18.
https://www.proquest.com/scholarly-journals/managing-budgets-complex-times-with-tight/docview/1285105465/se-2?accountid=11033
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