A306 Chapter 9 Smartbook Questions
The spending variance is labeled as favorable when the Blank______. actual cost is less than what the cost should have been at the actual level of activity actual cost is less than what the cost should have been at the planned level of activity amount spent is less than what was spent last period actual cost is more than what the cost should have been at the actual level of activity
actual cost is less than what the cost should have been at the actual level of activity
Companies use the _______ ________ cycle to evaluate and improve performance
variance analysis
The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ______ variance. revenue spending activity
activity
The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ________ variance. spending activity revenue
activity
The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) _________ variance.
activity
Unfavorable activity variances may not indicate bad performance because ______. increased activity should result in higher variable costs increased activity should result in higher fixed costs costs should not change as activity changes
increased activity should result in higher variable costs
To understand why actual net operating income differs from what it should have been at the actual level of activity, the _______ variances should be analyzed.
revenue and spending
The flexible budget performance report consists of
revenue and spending variances activity variances the planning budget, flexible budget and actual results
The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) ___________ variance.
spending
Planning budgets are sometimes called ______ budgets.
static; A planning budget is prepared using a static level of activity. A flexible budget takes into account what costs should have been at the actual level of activity.
A flexible budget shows what budgeted amounts should have been at the actual level of activity. As a result of this change in activity, the flexible budget will show a change in total _______.
variable cost revenue
A budget that takes into account how costs are affected by changes in level of activity is a(n) _______ budget.
flexible
A performance report shows that the planning revenue was $240,000, the flexible budget revenue was $225,000, and actual revenue was $230,000. The activity variance is $ ________.
15,000 U, unfavorable, or unfavourable
A performance report shows that the planning revenue was $200,000, the flexible budget revenue was $225,000, and actual revenue was $223,000. Which of the following statements are true? The revenue variance is $2,000 Unfavorable. The activity variance is $25,000 Favorable. The revenue variance is $2,000 Favorable. The activity variance is $25,000 Unfavorable.
The revenue variance is $2,000 Unfavorable. The activity variance is $25,000 Favorable.
Activity variances help managers understand why actual net income differs from what it should have been at the actual level of activity. True False
True
One option to generate a favorable ______ variance for net operating income is to increase the number of clients. revenue and spending activity
activity
A spending variance is the ________. actual amount spent difference between what a cost should have been at the actual level of activity and the actual amount of the cost projected amount to be spent difference between the budgeted cost of the item and the actual cost of the item
difference between what a cost should have been at the actual level of activity and the actual amount of the cost
A revenue variance is the ______. difference between what revenue should have been at the actual level of activity and the actual revenue actual total revenue earned difference between total revenue in the planning budget and actual total revenue difference between what a cost should have been at the actual level of activity and the actual amount of the cost
difference between what revenue should have been at the actual level of activity and the actual revenue
Options to generate a favorable revenue and spending variance include increase the number of clients increase operating efficiency protecting the selling price reduce the prices of inputs
increase operating efficiency protecting the selling price reduce the prices of inputs
When actual revenue _________ what the revenue should have been, the variance is labeled favorable. less than more than equal
more than
Revenue variances can be caused by _______. poor accounting controls changes in the mix of products sold changes in selling price changes in the level of activity
poor accounting controls changes in the mix of products sold changes in selling price
Activity variance: Subtract planning budget from flexible budget Revenue and spending variances: Subtract flexible budget from actual results
Activity variance: Subtract planning budget from flexible budget Revenue and spending variances: Subtract flexible budget from actual results
Unfavorable activity variances may not indicate bad performance because a. increased activity should result in higher fixed costs b. costs should not change as activity changes c. increased activity should result in higher variable costs
c. increased activity should result in higher variable costs
Possible causes of a spending variance include ______. changes in technology using too many inputs for the actual level of activity paying less than expected for inputs producing more or less product than expected
changes in technology using too many inputs for the actual level of activity paying less than expected for inputs
A spending variance is the ______. difference between the budgeted cost of the item and the actual cost of the item actual amount spent difference between what a cost should have been at the actual level of activity and the actual amount of the cost projected amount to be spent
difference between what a cost should have been at the actual level of activity and the actual amount of the cost
A revenue variance is the ________. difference between total revenue in the planning budget and actual total revenue actual total revenue earned difference between what a cost should have been at the actual level of activity and the actual amount of the cost difference between what revenue should have been at the actual level of activity and the actual revenue
difference between what revenue should have been at the actual level of activity and the actual revenue
The difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) __________ variance.
revenue
The difference between what the total sales should have been, given the actual level of activity for the period, and the actual total sales is a(n) _____________ variance.
revenue
Fancy Nail's monthly rent is $2,500. The company's static budget for March was based on the activity level of 2,000 manicures. Total sales was budgeted at $40,000 and nail technician wages (a variable cost based on the number of manicures) was budgeted at $20,000. Actual manicures in March totaled 2,200. Assuming no other expenses, Fancy Nails' flexible budget will show ______. wages of $20,000 sales of $44,000 net operating income of $19,500 rent expense of $2,750
sales of $44,000 net operating income of $19,500
The difference between a revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is a(n) ___________ variance.
activity
A flexible budget performance report combines the _______. activity variances with the revenue and spending variances manager's performance with the employee's performance net income for two periods
activity variances with the revenue and spending variances
The spending variance is labeled as favorable when the ______. actual cost is less than what the cost should have been at the planned level of activity amount spent is less than what was spent last period actual cost is more than what the cost should have been at the actual level of activity actual cost is less than what the cost should have been at the actual level of activity
actual cost is less than what the cost should have been at the actual level of activity
A favorable activity variance may not indicate good performance because a favorable activity variance.... for a fixed cost will occur simply because the actual level of activity is less than the budgeted level of activity Reason: Fixed costs are not impacted by the level of activity. for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity may occur simply because the purchasing department acquired low quality supplies at a discoun
for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity
