MATS-Variance analysis and Cash Budgeting

What is the primary purpose of calculating variances in management accounting?

• To determine the total revenue of a business.

• To identify deviations from budgeted expectations.

• To allocate fixed costs.

• To analyse market trends.

Which of the following is an example of a favourable variance?

• Actual production output exceeding budgeted output.

• Actual material costs are higher than standard material costs.

• Actual sales revenue falling short of budgeted revenue.

• Actual labour costs match budgeted labour costs.

In a cash budget, which component represents cash outflows?

• Accounts payable.

• Accounts receivable.

• Operating expenses.

• Sales revenue.

What does the term liquidity refer to in the context of cash budgeting?

• The ability to generate profits.

• The ease of converting assets into cash.

• The total debt of a company.

• The net income after tax.

Calculate the material price variance: - Standard price per unit: £5 - Actual price per unit: £4.50 - Actual quantity purchased: 1,000 units

• £500 favourable variance

• £500 unfavourable variance

• £450 favourable variance

• £450 unfavourable variance