Question

Identify the following type of budget variances by indicating if they are temporary/permanent (T/P) and favorable/unfavorable...

Identify the following type of budget variances by indicating if they are temporary/permanent (T/P) and favorable/unfavorable (F/U).

1. $500 for new computer needed to replace one that quit and was not repairable

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Answer #1

$500 need for new computer needed to replace one that quit and old computer was also not repairable.

Computer replacement is of parmanent nature, as once replaced it will need not to be replaced in upcoming Future and it will kept in business for long time.

So this variance is parmanent variance.

If old computer could be repaired, cost would have been less than replacement. So due to new computer more outflow will be there in comparison to repairs. So it is unfavorable variance.

So this variance is parmanent and unfavorable variance.

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