Positive or negative variances
Volume – budgeted volume was 1000 unite whereas the actual volume was 1200 units. Hence the actual volume was more by 200 units as compared to budgeted volume. Hence, the variance is positive.
Overtime hours – budgeted hours for overtime was 50 whereas the actual hours for overtime were 75 units. Hence, the actual hours were more by 25 hours as compared to budgeted volume. Hence, the variance is negative.
Supplies - budgeted supplies was 5000 unite whereas the actual supplies was 5100 units. Hence the actual supplies were more by 100 units as compared to budgeted volume. Hence, the variance is positive (Klychova, Faskhutdinova & Sadrieva, 2014).
Director shall report that the overtime hours variance were negative as the volume had positive variance. If the volume is more it can be expected that the overtime hours as well as supplies will be more. For instance, in case of 20% more cases it can be expected that overtime hours will be more by 20%. However, if the actual exceed this budget the director must explain the reason. Further, for adjusting the variances the director must prepare the budgets taking into consideration all the factors like short stay unit (Kaplan & Atkinson, 2015).
Kaplan, R. S., & Atkinson, A. A. (2015). Advanced management accounting. PHI Learning.
Klychova, G. S., Faskhutdinova, ?. S., & Sadrieva, E. R. (2014). Budget efficiency for cost control purposes in management accounting system. Mediterranean journal of social sciences, 5(24), 79.