The budget expenditure variance on Item A of a company’s budget was R10 000 whilst the percentage variance was calculated as -12.5%. Calculate the actual expenditure for Item A.

To calculate the actual expenditure for Item A, we can use the following relationship between the budget variance, percentage variance, and budgeted expenditure:

Given:
- Budget Expenditure Variance = \( R10\,000 \)
- Percentage Variance = \(-12.5\% \)

The percentage variance is given by the formula:

\[
\text{Percentage Variance} = \left(\frac{\text{Actual Expenditure} - \text{Budgeted Expenditure}}{\text{Budgeted Expenditure}}\right) \times 100
\]

We can rearrange this formula to solve for the Actual Expenditure:

\[
\text{Actual Expenditure} = \text{Budgeted Expenditure} + \text{Budget Expenditure Variance}
\]

Substituting the given values into the percentage variance formula to find the Budgeted Expenditure:

\[
-12.5\% = \left(\frac{R10\,000}{\text{Budgeted Expenditure}}\right) \times 100
\]

\[
\text{Budgeted Expenditure} = \frac{R10\,000 \times 100}{-12.5}
\]

\[
\text{Budgeted Expenditure} = -R80\,000
\]

Since the budgeted expenditure must be a positive amount, the correct interpretation is:

\[
\text{Budgeted Expenditure} = R80\,000
\]

Now, we can calculate the Actual Expenditure:

\[
\text{Actual Expenditure} = \text{Budgeted Expenditure} + \text{Budget Expenditure Variance} = R80\,000 + (-R10\,000)
\]

\[
\text{Actual Expenditure} = R70\,000
\]

So, the actual expenditure for Item A is **R70,000**.

Would you like any further details or have any questions?

Here are 5 related questions to consider:
1. How would the calculation change if the variance percentage were positive?
2. What would happen if the budget variance were zero?
3. How can we determine if the budget was overestimated or underestimated?
4. How does this method change if there are multiple items with variances in a budget?
5. What are some common causes of negative percentage variances in budgeting?

**Tip:** When dealing with variances, always check if the variance is positive or negative to determine if the actual amount is higher or lower than the budgeted amount.

Learn how to calculate the actual expenditure for Item A using the budget variance of R10,000 and a percentage variance of -12.5%. Understand the relationship between budgeted expenditure, budget variance, and percentage variance. Suitable for professionals needing to analyze financial data.

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