Question Description
Having a budget is critical for the financial stability of an
organization. Keeping track of how well the organization is actually
adhering to the budget, and subsequent identification of why the budget
numbers are being missed is equally important. Without this critical
“why” piece, it is difficult to make the necessary adjustments to the
budget or to organizational behavior that might be promoting
overspending.
A good budget is built with thoughtful consideration
of future costs and revenue. Though your budget is formulated with
expected figures in mind, the actual resulting values may vary
considerably. This variance–from projected to actual–can be a pleasant
surprise or a fiscal nightmare and can make financial decision making
difficult. Fortunately, variance analysis can enable management to
determine why variance occurred and what can be done to mitigate its
effects.
For those not comfortable with the use of Microsoft Excel, this week’s Optional Resources suggest several tutorials.
To prepare:
- Review
the information in this week’s Learning Resources dealing with variance
analysis, how it is calculated, and how it can be used in decision
making.
- View the video Week 8 Application Assignment Tutorial: Variance Analysis, provided in this week’s Learning Resources.
- Use the Week 8 Application Assignment Template,
provided in this week’s Learning Resources, to complete this
assignment. Carefully examine the information in each of the scenarios
and provide the necessary calculations. Using this information will help
you answer the questions.
By Day 7
Note: For those Assignments in this course that require you to perform calculations you must:
- Use the Excel spreadsheet template for the Week 8 assignment
- Show all your calculations and formulas in the spreadsheet.
- Answer any questions included with the problems (as text in the Excel spreadsheet).
A title and reference page are NOT needed in this assignment. Put your name and assignment at the top of the Excel spreadsheet.
Use the Week 8 Application Assignment Template for the Week 8 assignment
Salary Variance Scenario
For this Assignment run
a variance analysis. Based on the information you obtain: assess the
results of the analysis, suggest potential causes of the budget
variances and an explanation for addressing the situation.
Using the following performance data calculate
the volume adjusted labor rate variance and volume adjusted efficiency
variance. Your Variable Expense Factor is 40% and your Volume Change
Factor is 50%.
Note: Submit the Excel spreadsheet containing your Salary Variance Scenario calculations to the Assignment submission link.
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