BONUS QUESTIONS Answer two 5 points ity ls qua company has a

BONUS QUESTIONS- Answer two (5 points ity ls qua company has a favorable materials price variance variance. Explain the factors that can cause this. but an unfavorable materia 2. What is a flexible budget and how is it used? 3. What is the difference between an ideal standard and a pract t three factors that are important when selecting an activity base for a flexible overhead budget AND describe briefly why each is important. 4. Lis

Solution

Answer 1.

Factors causing Favorable Material price Variance

Favorable Material price variance is due to decrease in the prices of material purchased . Price decrease may be due to better bargain or reduction in government taxes or overall decrease in prices in the market. It may be due to availing of discounts from seller.

Factors causing Unfavorable Material Quantity variance

The reason for Unfavorable Material quantity variance may be due to

Answer 2

A Flexible budget is a budget prepared to analyze the profits of a business at various Activity level, say 80% or 50% etc. Flexible budget gives us the expected variable cost associated with different levels of activity. Fixed cost is also included but they do not change with the change in activity level.

A Flexible Budget is used by the management to take decisions for production. What level of Activity is most beneficial could be analyzed with the help of a flexible budget. Budget also helps management to analyze the variances once production is done or activity is complete.