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PEYTON APPROVED BUDGET VARIANCE REPORTOperating Budget is a detailed statement which shows estimated Incomes and Expensesof an organization based on the forecasted sales revenue during a given period. Itgenerally consists of various budgets such as Sales Budget, Purchase Budget, andProduction Budgets etc. A variance analysis is a measurement of variance between actualcost and the standard cost. Thus Variance analysis can be used to review the performanceof an organization.A divergence from the predetermined rates, expressed ultimately in money value,generally used in standard costing and budgetary control system. Variances which areprofitable for the organization are known as Favorable variance whereas variances whichincrease the cost for the organization are known as Unfavorable variance. Material costvariance is the difference between the standard material cost for actual output and actualcost incurred. Material efficiency variance is the difference between material costs due tothe usage of material. Labor cost variance is the difference between the standard laborcost for actual hours worked and actual wages paid. Labor efficiency variance is thedifference between actual hours worked by the workers for production of units and thestandard hours required to produce the actual quantity.The variance may arise due to the inaccurate budgeting, Changes in the economicrealities, and Employment theft. The inaccurate budgeting means due to bad guess ofIncome and expenses of the future periods. The change in economic realities refers to thecompany is experienced an increase in cost or decrease in revenue due to change in themarket conditions. The Employment theft refers to employees perpetuates theft or fraudwhich is difficult to detect and becomes the reason for the variance for the performanceof the company.Operating Budget is essential for an organization for the preparation of Master budgets.Variance analysis helps management in the determination of reason for these varianceand corrective action thereon.
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