We must compare our static budget to the flexible one to see if there have been any adjustments in price or quantities over the years. For example, let’s say that an organization had revenues of $4.7 million according to their static budget but then they make changes which leads to a flexible budget of $4.8 million in revenues instead – this would generate an increase in volume variance equal to $0.1 million ($4.8 minus $4.7).
We can calculate the volume variance and the management variance by comparing the results of the flexible and static budgets to the actual costs reported during the period in question (in this example, it was $4.2million). The volume variance can be calculated by subtracting the expected costs from those that were actually incurred. This gives us an amount of -$0.1million ($4