What term represents a difference between budgeted amount and actual amount of a line item that is expected to reverse itself in a subsequent period?

• A. A permanent variance
• B. A fixed cost
• C. A temporary variance
• D. A flexible cost

Answer: (C)

In budgeting variance analysis, a difference between what was budgeted and what actually occurred that is expected to reverse in the next period is called a temporary variance. This happens when the mismatch is due to timing, accruals, or deferrals that will cancel out once the items settle in the following period, rather than reflecting a lasting change in cost structure.

A permanent variance would indicate a real, ongoing shift that won’t reverse. A fixed cost is a cost that doesn't vary with activity, unrelated to whether a variance reverses. A flexible (or variable) cost changes with activity, again not about a one-period reversal of a difference.