Which of the following statements is true of cost variances and efficiency variances?
A)They pertain to the difference between the static budget and actual results.
B)They pertain to the difference between the flexible budget and actual results.
C)They pertain to the difference between the flexible budget and the static budget.
D)They pertain to the difference between the static budget and the previous year's actual results.

Question

Quizplus · Accepted Answer

Cost variances and efficiency variances pertain to the difference between the flexible budget and actual results. Cost variances involve the difference between the actual and budgeted costs, while efficiency variances involve the difference between actual activity levels and budgeted activity levels. The static budget is a fixed budget prepared before the start of the period and does not account for changes in activity levels, hence it is not relevant in computing variances. Similarly, comparing with the previous year's actual results does not account for changes in the current year's activities, hence it is also not relevant in computing variances.

Which of the Following Statements Is True of Cost Variances