| Spending variance | The difference between the actual amount of the cost and how much the cost should have been, given the actual level of activity. A favorable (unfavorable) spending variance occurs because the cost is lower (higher) than expected, given the actual level of activity for the period. |
| Revenue variance | The difference between the actual revenue for the period and how much the revenue should have been, given the actual level of activity. A favorable (unfavorable) revenue variance occurs because the revenue is higher (lower) than expected, given the actual level of activity for the period |
| Planning budget | A budget created at the beginning of the budgeting period that is valid only for the planned level of activity. |
| Flexible budget | A report showing estimates of what revenues and costs should have been, given the actual level of activity for the period. |
| Activity variance | The difference between a revenue or cost item in the flexible budget and the same item in the static planning budget. An activity variance is due solely to the difference between the actual level of activity used in the flexible budget and the level of activity assumed in the planning budget |
