Variance in Budgeting

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Explaining variance

Identify the source of revenue variance by looking at underlying volume and price data.

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Tara is the manager of Great Burgers. She's reviewing the results for the recent quarter, and notices that actual revenues are not the same as the budgeted revenues. She investigates further and finds that sales of FlippyDoo Burgers totaled 7,260 burgers, versus a budgeted revenue of 7,000.

What type of variance is this?

Not the best choice. The quantity of burgers sold exceeded the budgeted amount.


Correct choice. The quantity of burgers sold exceeded the budgeted amount.


Not the best choice. No information has been provided about the type of revenue variance.


Not the best choice. There is a variance in the quantity of burgers sold versus budget.


Tara calculates that the average price per FlippyDoo sold during the quarter was $3.25, compared to a budgeted price of $3.40.

What type of variance is this?

Not the best choice. No information has been provided about the type of revenue variance.


Not the best choice. No information has been provided about the type of revenue variance.


Correct choice. The average price of burgers sold was below the budgeted average price.


Not the best choice. There is a variance in the average price of burgers sold versus budget.


The total FlippyDoo revenue for the quarter was $23,595 versus the budgeted revenue of $23,800.

How should Tara describe this variance?

Not the best choice. The unfavorable revenue variance can actually only be described as the result of variance in price and/or volume.


Not the best choice. One component of the revenue variance is an unfavorable price variance.


Correct choice. The revenue variance is unfavorable, and is due to the combination of an unfavorable price variance and a favorable quantity variance.


Not the best choice. One component of the revenue variance is a favorable quantity variance.


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