Certified Apartment Portfolio Supervisor (CAPS) Practice Exam - Module 2

How is a budget variance defined?

1. The difference between expected and actual income

2. The difference between budgeted and actual expenses

3. The difference between budgeted income/expense and actual income/expense

4. The difference between prior month and current month results

The correct answer is: The difference between budgeted income/expense and actual income/expense

A budget variance is defined as the difference between budgeted income or expenses and actual income or expenses. This definition captures the comprehensive nature of what a budget variance entails; it incorporates both sides of the financial equation by comparing the planned amounts against what has actually occurred. This is significant because understanding both income and expenses allows property managers and supervisors to grasp the overall financial performance of their operations. Variances can indicate areas where the property may be over or underperforming relative to expectations and can help inform future financial planning and decision-making processes. Considering the other responses, the first option focuses only on income, while the second option is limited to expenses. The fourth option compares results from different time periods but does not address the concept of budgeting directly. Each of these options, while related, does not capture the full scope of a budget variance as effectively as the correct choice.