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Static and Flexible Budgets, Variances

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Static and flexible budgets, variances, information quality The photocopying department in a community college has budgeted monthly costs at $40,000 per month plus $7 per student. Normally 800 students are enrolled. During January there were 730 students (which is within the relevant range). At the end of the month, actual fixed costs were $42,000, and variable costs were $3,650.

Please address the following:
A. Develop a static budget for photocopying costs based on 800 students.
B. Calculate the January static budget variance for fixed and variable photocopying costs.
C. Develop a flexible budget for the actual volume of students in January.
D. Calculate the January flexible budget variance for fixed and variable photocopying costs.
E. Which variance information—part (B) or (D)—is of higher quality? Explain.

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Solution Summary

Your tutorial shows you in columnar format the two variances. Click in cells to see how computations were done. A few sentences explains which variance is highest quality.

Solution provided by:
Carol Sargent, PhD
Education
  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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