Variance analysis is for controlling. Do analysis on a monthly basis .

Flexible budget is static budget that is fixed at actual sales volume.

<- Labour rate ( dl) , Price variance

(DM), Spending variance (FOH)
variance - >
All use actual sales volume
AQ X SP vs AQ X AP

<-Sales volume Variance->

I sold less units ,how it affect my
revenue
Go after the sales department, as they
are responsible for thisvariance.

<-Efficiency variance - >

AQ X SP vs SQ x SP
Actual budget
Actual Sales Revenu
= Actual sales volume X
Actual Cost (AQ X AP)
DM = 2.5kg X $1.5/kg

Flexed Budget
Actual sales volume
Actual sales volume X
standard cost ( SQ X
SP)
DM = (2kg X $1)
X1000

Static Budget
Budgeted sales quantity
= Standard cost = SQ X
SP
DM= 2 KG X $1 / kg

Q= quantity of resources used to produce this actual sales quantity. Not sales
unit.