Control

This chapter discusses the difference between budgets used for planning purposes and budgets used for control purposes. It also illustrates the use of flexible budgets and variance analysis to control an organization’s operations. After reading this chapter you will:

Understand the difference between a static budget and a flexible budget;

Understand the basic elements of a control system;

Know how to develop a flexible budget;

Understand the difference between volume, price and efficiency variances;

Be able to calculate and interpret price and efficiency variances;

Be able to calculate and interpret variable overhead variances;

Understand how to use variance analysis for control purposes.