Day: October 7, 2021

John owns a garden landscaping business.

He has been advised by his accountant Bob to set budgets for the business.

John uses variance analysis to monitor these budgets.

The table below shows the budget data from a recent very important gardening contract. 

Budgeted (£)              Actual (£)

Overheads                     300                             300

Labour                           1200                           900

Raw materials                800                            800

What is the variance between Budgeted and Actual data?

Select ONE answer:

1. £1 700 adverse
2. £1 700 favourable
3. £300 adverse
4. £300 favourable

Show your workings to arrive at your answer, and explain and justify your reasons:

……………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

This multiple-choice question is suitable for Accounting KS5 classes.

The answer is 4

1. Not correct
2. Not correct
3. Not correct
4. Correct – The actual cost: £300 + £900 + £800 = £2 000.  The budgeted cost: £300 + £1 200 + £800 = £2 300.  Formula for cost variance = Actual – Budget

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