Question

 What is a variance or budgeted expected performance and how are variances used?

 What is management by exception?

 What is a static budget

 What is a static budget variance

 What is Favorable budget variance

 What is an unfavorable budget variance

 What is a flexible budget?

 What are the sources for obtaining budget input?

 What is meant by standard?

 What is benchmarking?

Answer 1

Solution. The above given questions are answered numbering 1 to 10 below:

1.An organization operating with the set objective of making profit along with social impact in society, sets budgeted expected performance based on data and information collected and if there occurs/exists deviation from the set performance level, such deviation is called as variance. It is an important tool of budgetary control in an organization for the management, monitoring and, administering the set planned process of budgeted costs and necessary steps are to be taken to bridge this gap of deviation in order to sustain in today's competitive economic business market.

2.Management by exception requires in an organization delegation of authority to its employees, to create and satisfy customers. An organization is what its employees are, as said, empowers its employees. Under this model, manager's attention are drawn only when there occurs a large gap between budgeted performance standards and actual performance and necessary measures and action are undertaken by the management for the smooth run of its operations.

3.An organization deciding to do business in economic market needs to focus on planning process which requires setting of budgets. Static budget is one type of budget which remains unchanged with the changing activity levels in an organization during an accounting period.

4.An organization incorporating static budget finds occurrence of deviation of actual performance result from that of standard budget made calls it as static budget variance and encompasses two elements called flexible budget variance and sales volume variance.

5.An organization while setting standard budget finds improved and better actual performance during an accounting period calls it a favorable budget deviation or variance. It implies generation of more revenues from the activities than the established standard budgeted plan.

6.An organization while setting standard budget plans encounters reduced or lesser actual performance results during an accounting period calls it an unfavorable budget variance. It implies situation in which an organization incurs more costs resulting in diminished revenues than budgeted level of data.

7.An organization needs to employ setting up of budget in order to sustain in business by meeting set target profit levels, a flexible budget is one which changes with changes in activity levels of an organization during an accounting period and facilitates management in recalculating employing actual level of activity data in decision making process.

8.An organization in order to sustain in competitive economic market needs to carefully study, analyze its planned sales volume, inputs required,costs to be incurred, revenue generation, cash flows during an accounting period along with organization's assets and liabilities using bottom up approach of management and can also employ budget committee. Past data and detailed analysis of current operation helps setting up of budget keeping in mind available resources and environmental constraints.

9.Standard is a word employed and used quite often in business environment to represent established or set level of range of activity and can serve as a means of comparison to actual results obtained during an accounting period.

10.Benchmarking is a process of comparison of organizations performance level with that of best operating organization in that business economic market involving cost, time of operation and quality achieved and facilitates in providing information for achieving competitive advantage.