From the perspective of managing a budget, what term is used to describe the difference between the amount of money that was budgeted and the actual amount of money spent?

Question: From the perspective of managing a budget, what term is used to describe the difference between the amount of money that was budgeted and the actual amount of money spent?

The term used to describe the difference between the amount of money that was budgeted and the actual amount of money spent is budget variance. It can be positive or negative. A positive budget variance means that the actual amount spent was less than the budgeted amount, which is considered favorable. A negative budget variance means that the actual amount spent was more than the budgeted amount, which is considered unfavorable.

Budget variance can be caused by a number of factors, such as:

• Changes in the cost of goods or services
• Changes in the volume of sales or production
• Changes in the exchange rate
• Unexpected expenses

Budget variance can be an important indicator of the financial health of a business. It can help managers identify areas where costs can be controlled or where revenue can be increased. By regularly monitoring budget variance, managers can make adjustments to the budget to ensure that it is aligned with the actual performance of the business.

Here are some of the ways to calculate budget variance:

• Absolute budget variance: This is the difference between the budgeted amount and the actual amount, expressed in monetary terms.
• Percentage budget variance: This is the absolute budget variance expressed as a percentage of the budgeted amount.
• Cumulative budget variance: This is the sum of the budget variances for all periods up to a given point in time.

Budget variance analysis is a valuable tool for managing a budget. By regularly monitoring budget variance, managers can identify areas where costs can be controlled or where revenue can be increased. This can help to ensure that the budget is aligned with the actual performance of the business and that the business is financially healthy.

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