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CMA Part 1
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1. External financial reporting decisions
2. Planning, budgeting, and forecasting
3. Performance management
4. Cost management
5. Internal control
6. Technology and analytics
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3.1.3.1 Learning outcome statements
Achievable CMA Part 1
3. Performance management
3.1. Cost and variance measures
3.1.3. Flexible budgets
Our CMA Part 1 course is currently in development and is a work-in-progress.

Learning outcome statements

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The learning outcome statements relevant for this section are:

  1. analyze a flexible budget based on actual sales (output) volume
  2. calculate the sales-volume variance and the sales-price variance
  3. calculate the flexible-budget variance by comparing actual results to the flexible budget
  4. investigate the flexible-budget variance to determine individual differences between actual and budgeted input prices and input quantities

Flexible budget analysis

  • Adjusts budgeted costs for actual sales/output volume
  • Allows comparison of actual results to adjusted expectations
  • Reveals performance independent of sales volume changes

Sales-volume variance and sales-price variance

  • Sales-volume variance: difference due to actual vs. budgeted sales quantity
  • Sales-price variance: difference due to actual vs. budgeted selling price

Flexible-budget variance calculation

  • Compares actual results to flexible budget (at actual volume)
  • Measures overall performance excluding sales volume effect

Investigating flexible-budget variance

  • Breaks variance into input price variance and input quantity variance
  • Input price variance: actual vs. budgeted cost per unit of input
  • Input quantity variance: actual vs. budgeted quantity of input used
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Next  | 3.1.3.2 Introduction to flexible budgets
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Learning outcome statements

The learning outcome statements relevant for this section are:

  1. analyze a flexible budget based on actual sales (output) volume
  2. calculate the sales-volume variance and the sales-price variance
  3. calculate the flexible-budget variance by comparing actual results to the flexible budget
  4. investigate the flexible-budget variance to determine individual differences between actual and budgeted input prices and input quantities
Key points

Flexible budget analysis

  • Adjusts budgeted costs for actual sales/output volume
  • Allows comparison of actual results to adjusted expectations
  • Reveals performance independent of sales volume changes

Sales-volume variance and sales-price variance

  • Sales-volume variance: difference due to actual vs. budgeted sales quantity
  • Sales-price variance: difference due to actual vs. budgeted selling price

Flexible-budget variance calculation

  • Compares actual results to flexible budget (at actual volume)
  • Measures overall performance excluding sales volume effect

Investigating flexible-budget variance

  • Breaks variance into input price variance and input quantity variance
  • Input price variance: actual vs. budgeted cost per unit of input
  • Input quantity variance: actual vs. budgeted quantity of input used

More from Flexible budgets

  • Introduction to flexible budgets
  • The flexible budget variance