Question

Q1: What is the operating budget and what are its components listing first the budget relied on by most other supporting budgets. Two sentences

Q2: Contrast the calculation differences between the flexible-budget and sales-volume variances. Two sentences

Q3: How do managers use variances? Two sentences

Answer 1

Que 1. Operating budget is an estimate of operating income of an organisation and prepares with the help of many other budgets or you can say its components are relied on by most other supporting budget and they are:

Sales budget, production budget, finished goods inventory budget, overheads budget, material budget, labour budget.

Que 2. Flexible budget is the calculation on based on totally budgeted data (sale price and all costs) but for actual volume produced. In contrast to this sales volume variance is the difference between budgeted contribution margin and budegted contribution margin at actual sales volume.

Que3. VAriances are the difference of what is planned and what actually occured. Managers used these variances for cost controlling purpose and for reconciliation of actual profit with budgeted profit. Also, Variances are used to find out any excption deviations from the budget.