Formulas for preparation of budget and then compare with actuals

Question

Accepted Answer

The formulas for preparing a budget and comparing it with actuals involve calculating variances and analyzing the reasons behind them.

The formula for preparing a budget is: Budgeted Amount = Previous Year's Actual Amount + Expected Changes
The formula for comparing budget with actuals is: Variance = Actual Amount - Budgeted Amount
To analyze the reasons behind variances, further calculations and investigation may be required
Examples of budget preparation formulas include forecasting sales based on historical data and estimating expenses based on projected activities
Examples of comparing budget with actuals formulas include calculating the variance in material costs or labor hours

Accepted Answer

Material cost variance=standard cost-actual cost, material price variance=(standard price -actual price) actual quantity, material usage variance=(standard quantity -actual quantity) standard price

Formulas for preparation of budget and then compare with actuals

Popular interview questions of Cost Accountant