Accounting 2: Chapter 9

Companies use the ______ _______ cycle to evaluate and improve performance.

variance analysis

t/f: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was lower than budgeted.

false opposite

Estimates of what revenues and costs should have been based on the actual level of activity are shown on the ______ budget.

flexible

Using multiple cost drivers on a flexible budget report will generally ______.

increase accuracy

A company's budgeted cost of supplies when 5,000 units are sold is $7,500 of fixed costs plus $1.25 variable cost per unit. What is the increase in the total cost of supplies if 350 more units are sold than expected?

$437.50

Nonprofit organizations ______.

- have significant funding sources besides sales - may have revenue sources that are fixed

A cost center's performance report does not include ______.

- revenue - noi

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 ______.

- revenue - variable cost

The flexible budget performance report consists of ______.

- the planning budget, flexible budget and actual results - revenue and spending variances - activity variances

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

The spending variance is labeled as favorable when the ______.

actual cost is less than what the cost should have been at the actual level of activity

The variance analysis cycle

begins with the preparation of performance reports

A revenue variance is the ______.

difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period.

A spending variance is the ______.

difference between what a cost should have been at the actual level of activity and the actual amount of the cost

When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______.

net income is higher than expected but all or most expense variances are unfavorable

A budget that is prepared before the beginning of the period for a specific level of activity is called a ______ budget.

planning

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

An unchanged planning budget is known as a(n) _________ planning budget.

static

Planning budgets are sometimes called ______ budgets.

static

Commission expense is budgeted to be $16,000 at a planned sales level of 4,000 units. If only 2,900 units are sold, how much commission expense will appear on the flexible budget, and is the activity variance favorable or unfavorable?

$11,600 and favorable

Fancy Nails has an estimated cost for supplies of $0.75 per manicure. June's budget was based on 2,400 manicures and a total cost for supplies of $1,800. June's actual activity was 2,500 manicures. The actual cost of supplies in June was $2,000. Calculate the spending variance for June.

$125 U Reason: Flexible budget amount for supplies: $0.75 × 2,500 manicures = $1,875. Spending variance: $1,875 - $2,000 = $125 U.

Revenue on the planning budget is expected to be $380,000 for 1,900 client visits. The revenue on the flexible budget is $410,000, showing that there were actually ______ client visits.

2050

Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a(n) _________ activity variance.

F

Performance reports for cost centers ______.

do not include revenues or net income