Question

Flexible Budget Performance Report Flexible Activity variance planned budget Actual spending variance resutl budget liters of blood collected 620 620 500 Medical supplies 9,250 50 F 9300 1,800 U 7,500 6,000 labt tests 6,180 1,260 7440 1,440 U Equipment depreciation 2,800 300 2,500 0 2,500 1,000 1,000 1,000 Rent N 500 Utilities 570 70 0 N 500 11550 Administration 11,740 190 300 U 11,250 total expense 32290 28,750 31,540 750 3,540 U LL

Do you think any of the variances in the report you prepared should be investigated? Why?

Answer 1

Lab tests should be investigated. The variance is significant and also it is favorable which means there has been considerable savings compared to the flexible budget allocated for Lab tests

Even if the variance is favorable it should not be ignored and needs to analysed and investigated so that corrective actions can be taken next time. It is also possible that the standard cost allocated to it might be higher due to which favorable variance might have come. The Standard allowed can be corrected in next budget.

Rest of the variance are not significant but can be analysed based on cost benefit analysis.