State the difference between master budget , pro forma budget, and a flexible budget.

Question

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Answer 1

Question

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

Chapter 14, Problem 1Q

To determine

State the difference between master budget, pro forma budget, and a flexible budget.

Expert Solution & Answer

Explanation of Solution

The difference between master budget, pro forma budget, and a flexible budget:

A master budget indicates estimated operating profit depending on a single output level (“planned sales”) for future period. As such, this budget is also known to as a static budget.
Pro-forma budgets indicate budgeted operating income for various output levels (production or sales) and these are prepared for any output level within the scope of relevant range.
The flexible budget is “flexed” to the actual output level attained (for instance, sales volume). The implementation of the flexible budget is crucial to the process of describing the total master (static) budget variance for the period.
“Which means, the flexible budget permits users to break down the total static budget variance for a period into a sales volume variance and a total flexible-budget variance. Therefore, some accountants define to this budget as a control budget”.

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Answer 2

Question

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

Chapter 14, Problem 1Q

To determine

State the difference between master budget, pro forma budget, and a flexible budget.

Expert Solution & Answer

Explanation of Solution

The difference between master budget, pro forma budget, and a flexible budget:

A master budget indicates estimated operating profit depending on a single output level (“planned sales”) for future period. As such, this budget is also known to as a static budget.
Pro-forma budgets indicate budgeted operating income for various output levels (production or sales) and these are prepared for any output level within the scope of relevant range.
The flexible budget is “flexed” to the actual output level attained (for instance, sales volume). The implementation of the flexible budget is crucial to the process of describing the total master (static) budget variance for the period.
“Which means, the flexible budget permits users to break down the total static budget variance for a period into a sales volume variance and a total flexible-budget variance. Therefore, some accountants define to this budget as a control budget”.

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Answer 3

Question

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

Chapter 14, Problem 1Q

To determine

State the difference between master budget, pro forma budget, and a flexible budget.

Expert Solution & Answer

Explanation of Solution

The difference between master budget, pro forma budget, and a flexible budget:

A master budget indicates estimated operating profit depending on a single output level (“planned sales”) for future period. As such, this budget is also known to as a static budget.
Pro-forma budgets indicate budgeted operating income for various output levels (production or sales) and these are prepared for any output level within the scope of relevant range.
The flexible budget is “flexed” to the actual output level attained (for instance, sales volume). The implementation of the flexible budget is crucial to the process of describing the total master (static) budget variance for the period.
“Which means, the flexible budget permits users to break down the total static budget variance for a period into a sales volume variance and a total flexible-budget variance. Therefore, some accountants define to this budget as a control budget”.

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Answer 4

Question

Definition Definition Measure used to estimate the difference between the budgeted and annual proportion for a specific accounting year. A favorable budget variance refers to positive variances or gains, while unfavorable or negative variances refer to a shortfall in the budget. A budget variance is indicative of the instances where the actual costs incurred are higher or lower than the estimated costs.

Chapter 14, Problem 1Q

To determine

State the difference between master budget, pro forma budget, and a flexible budget.

Expert Solution & Answer

Explanation of Solution

The difference between master budget, pro forma budget, and a flexible budget:

A master budget indicates estimated operating profit depending on a single output level (“planned sales”) for future period. As such, this budget is also known to as a static budget.
Pro-forma budgets indicate budgeted operating income for various output levels (production or sales) and these are prepared for any output level within the scope of relevant range.
The flexible budget is “flexed” to the actual output level attained (for instance, sales volume). The implementation of the flexible budget is crucial to the process of describing the total master (static) budget variance for the period.
“Which means, the flexible budget permits users to break down the total static budget variance for a period into a sales volume variance and a total flexible-budget variance. Therefore, some accountants define to this budget as a control budget”.

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Answer 5

Chapter 14, Problem 1Q

To determine

State the difference between master budget, pro forma budget, and a flexible budget.

Expert Solution & Answer

Explanation of Solution

The difference between master budget, pro forma budget, and a flexible budget:

A master budget indicates estimated operating profit depending on a single output level (“planned sales”) for future period. As such, this budget is also known to as a static budget.
Pro-forma budgets indicate budgeted operating income for various output levels (production or sales) and these are prepared for any output level within the scope of relevant range.
The flexible budget is “flexed” to the actual output level attained (for instance, sales volume). The implementation of the flexible budget is crucial to the process of describing the total master (static) budget variance for the period.
“Which means, the flexible budget permits users to break down the total static budget variance for a period into a sales volume variance and a total flexible-budget variance. Therefore, some accountants define to this budget as a control budget”.

Answer 6

Chapter 14, Problem 1Q

To determine

State the difference between master budget, pro forma budget, and a flexible budget.

Expert Solution & Answer

Explanation of Solution

The difference between master budget, pro forma budget, and a flexible budget:

A master budget indicates estimated operating profit depending on a single output level (“planned sales”) for future period. As such, this budget is also known to as a static budget.
Pro-forma budgets indicate budgeted operating income for various output levels (production or sales) and these are prepared for any output level within the scope of relevant range.
The flexible budget is “flexed” to the actual output level attained (for instance, sales volume). The implementation of the flexible budget is crucial to the process of describing the total master (static) budget variance for the period.
“Which means, the flexible budget permits users to break down the total static budget variance for a period into a sales volume variance and a total flexible-budget variance. Therefore, some accountants define to this budget as a control budget”.

Answer 7

Chapter 14, Problem 1Q

To determine

State the difference between master budget, pro forma budget, and a flexible budget.

Answer 8

Expert Solution & Answer

Explanation of Solution

The difference between master budget, pro forma budget, and a flexible budget:

A master budget indicates estimated operating profit depending on a single output level (“planned sales”) for future period. As such, this budget is also known to as a static budget.
Pro-forma budgets indicate budgeted operating income for various output levels (production or sales) and these are prepared for any output level within the scope of relevant range.
The flexible budget is “flexed” to the actual output level attained (for instance, sales volume). The implementation of the flexible budget is crucial to the process of describing the total master (static) budget variance for the period.
“Which means, the flexible budget permits users to break down the total static budget variance for a period into a sales volume variance and a total flexible-budget variance. Therefore, some accountants define to this budget as a control budget”.