ACT 460 Module 6 Critical Thinking : Variance Analysis 


Critical Thinking: (100 )

Choose one of the two options below.    Option #1: Variance Analysis 

The budgeting process may be approached differently in various firms. Top-down budgeting has its inception with directives from senior management who prepare the budget for staff and assess performance based on objectives established at higher levels. Any additional compensation received occurs as a result of achieving budgetary targets imposed by others. In contrast, bottom-up budgeting reflects the predictions of cost, revenue, profit, and investment center managers—proposed and approved by senior managers. Incentives are negotiated by managers proposing the budget rather than imposed by higher level executives.

In a well-written paper demonstrating CSU-Global standards, answer the following questions:

Define a flexible budget and describe its use. Under which budgeting approach would flexible budgets

more likely be used, and why?

  1. What might be the most important consideration in investigating budget variances?
  2. What are the potential benefits of monitoring direct cost variances?
  3. What are the potential benefits of monitoring overhead variances?
  4. Should managers be commended for achieving favorable overhead spending, efficiency, and production

volume variances? Rationalize your response.

In addition, include two or three outside references to support your research and conclusions. Your paper should meet the following requirements:

2-3 pages in length

  • Formatted according to the CSU-Global Guide to Writing and APA Requirements
  • Swiss Chocolate Manufacturing Company Raw materialsDirect manufacturing labor  Indirect manufacturing labor  Factory insurance and utilities  Depreciation – machinery and factoryRepairs and maintenance – factory

    Selling, marketing and distribution expenses  General and administrative expenses

    Variable cost and volume data  Raw materials = 0.25 lbs x $2.00/lb.

    Direct labor = 0.025 hr x $10/hr.

    Volume in units

    Variable costs total

    $             200,000

    $             100,00

  • $               20,000Milk chocolate
  •  $                    0.50
  •  $                    0.25400,000
    Fixed costs total $          52,500$          31,500

    $          38,500

    $          14,000

    $          40,000

  •  $          60,0