Budget variance reasoning: Practice 1

10 original teaching questions with answers and explanations.

Instructions for this set

Signed variance means actual minus budget in this set. For costs, overspending is adverse. For revenue, exceeding budget is favourable. Use the budget as the percentage base.

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  1. 1. A cost budget is $8,000 and actual cost is $8,600. What is the signed variance?
    1. +$600
    2. +$7,400
    3. +$16,600
    4. -$600

    Reference: q-2d5f2b5d-80 · Report this question

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    Answer: A. +$600

    Actual minus budget is 8,600 minus 8,000 = +$600, an adverse cost variance.
  2. 2. Actual cost is $9,200 against a $10,000 budget. How far below budget is the cost as a percentage of budget?
    1. 92%
    2. 8%
    3. 8.70%
    4. 10%

    Reference: q-d31e24fa-108 · Report this question

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    Answer: B. 8%

    The saving is $800. Divide by the $10,000 budget: 8% below budget.
  3. 3. An annual budget of $48,000 is allocated evenly by month. What is the first-quarter budget?
    1. $4,000
    2. $8,000
    3. $12,000
    4. $16,000

    Reference: q-7a7697f2-92 · Report this question

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    Answer: C. $12,000

    A quarter contains three of twelve months. 48,000 times 3/12 = $12,000.
  4. 4. An annual budget is $24,000. Spending so far is $5,600, $6,200 and $4,800 across three quarters. What remains?
    1. $8,000
    2. $6,400
    3. $7,200
    4. $7,400

    Reference: q-b4009b0f-111 · Report this question

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    Answer: D. $7,400

    Spent total is $16,600. Remaining budget is 24,000 minus 16,600 = $7,400.
  5. 5. Revenue budget is $50,000 and actual revenue is $54,000. What is the variance classification?
    1. $4,000 favourable
    2. $54,000 favourable
    3. No variance
    4. $4,000 adverse

    Reference: q-c0a04e7e-94 · Report this question

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    Answer: A. $4,000 favourable

    Revenue exceeded budget by $4,000, so the revenue variance is favourable under the stated convention.
  6. 6. Travel is $500 over budget and software is $300 under budget. What is the combined cost variance?
    1. $800 over
    2. $200 over
    3. $200 under
    4. $800 under

    Reference: q-fcf9f620-98 · Report this question

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    Answer: B. $200 over

    Offset the $300 saving against the $500 excess to obtain a net $200 overspend.
  7. 7. A plan budgets 200 units at $15 each. Actual purchase is also 200 units at $16 each. What is the excess total cost?
    1. $400
    2. $100
    3. $200
    4. $300

    Reference: q-413230a6-116 · Report this question

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    Answer: C. $200

    Holding quantity constant, the $1 extra per unit applies to 200 units, giving $200.
  8. 8. A cost of $6,300 is 5% above budget. What was the budget?
    1. $6,150
    2. $6,615
    3. $5,985
    4. $6,000

    Reference: q-5247699d-58 · Report this question

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    Answer: D. $6,000

    Actual is 1.05 times budget. Divide 6,300 by 1.05 to get $6,000.
  9. 9. A project has $15,000 authorised. It has spent $9,800 and has confirmed remaining costs of $6,100. What additional budget is needed to cover those costs?
    1. $900
    2. $1,100
    3. $500
    4. $800

    Reference: q-1bf0b678-154 · Report this question

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    Answer: A. $900

    Total expected cost is 9,800 plus 6,100 = $15,900. This is $900 above the authorised budget.
  10. 10. An evenly allocated six-month budget is $30,000. After two months, actual spending is $11,000. Compared with the two-month allocation, what is the variance?
    1. $19,000 under
    2. $1,000 over
    3. $1,000 under
    4. $4,000 over

    Reference: q-36b56dc8-157 · Report this question

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    Answer: B. $1,000 over

    Two months receive 30,000 times 2/6 = $10,000. Actual $11,000 exceeds it by $1,000.

Review your method

Return to the budget variance reasoning lesson and identify the reasoning step behind each mistake before repeating the set.

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