Chapter9: Flexible Budgets and Performance Analysis

The difference between a revenue or cost item in the static planning budget and the same item in the flexible budget. An activity variance is due solely to the difference between the level of activity assumed in the planning budget and the actual level of activity used in the flexible budget. (p. 389)

A report showing estimates of what revenues and costs should have been, given the actual level of activity for the period. (p. 384)

A budget created at the beginning of the budgeting period that is valid only for the planned level of activity. (p. 384)

The difference between how much the revenue should have been, given the actual level of activity, and the actual revenue for the period. A favorable (unfavorable) revenue variance occurs because the revenue is higher (lower) than expected, given the actual level of activity for the period. (p. 390)

The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost. A favorable (unfavorable) spending variance occurs because the cost is lower (higher) than expected, given the actual level of activity for the period. (p. 391)