accounting sb ch9
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
The variance analysis cycle _____
begins with the preparation of performance reports
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
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 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
If the actual cost is greater than what the cost should have been, the variance is labeled as _______
unfavorable
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
True or false: 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
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
favorable
Companies use the _____ cycle to evaluate and improve performance
variance analysis
A revenue variance is the ___
difference between what revenue should have been at the actual level of activity and the actual revenue
Performance reports for cost centers ______
do not include revenues or net income Reason: Cost center reports should follow the same principles as reports that include revenue
When actual revenue ______ what the revenue should have been, the variance is labeled favorable
exceeds
Estimates of what revenues and costs should have been based on the actual level of activity are shown on the ____ budget
flexible
Comparing actual costs to what the costs should have been for the actual level of activity is done on a(n) _____ budget
flexible
An estimate of what revenue and costs should have been, based on the actual level of activity is shown on a ____
flexible budget
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 Reason: Flexible budget expense: $16,000 ÷ 4,000 = $4 per unit × 2,900 units = $11,600. Since the flexible budget expense < planning budget expense, the variance is favorable
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
Fancy Nails' budgeted revenue is $20 per manicure. The planning budget for June was based on 2,400 manicures. During June, the actual revenue was $49,750 for 2,500 manicures. The revenue variance for June is ____
$250 U Reason: Flexible budget amount for revenue = $20 per manicure × 2,500 manicures = $50,000. Revenue variance = $50,000 - $49,750 = $250 U
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 activity variance is $25,000 Favorable - The revenue variance is $2,000 Unfavorable Reason: The activity variance is the difference between the planning budget and the flexible budget Reason: The revenue variance is the difference between the flexible budget and actual results
The flexible budget performance report consists of _____
- activity variances - revenue and spending variances - the planning budget, flexible budget and actual results
Options to generate a favorable revenue and spending variance include ___
- increase operating efficiency - protecting the selling price - reduce the prices of inputs
Nonprofit organizations ______
- may have revenue sources that are fixed - usually have significant funding sources other than sales
A cost center's performance report does not include _____
- revenue - net operating income
One option to generate a favorable ______ variance for net operating income is to increase the number of clients
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
Match the comparisons made on the performance report
activity variance --> subtract planning budget from flexible budget revenue and spending variances --> subtract flexible budget from actual results
When preparing a flexible budget, the level of activity
affects variable costs only
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
The prominent difference between performance reports in nonprofit and for-profit organizations is that nonprofit organizations ____
usually receive significant funding from sources other than sales
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
2,050 Reason: $380,000 ÷ 1,900 = $200 per client visit. $410,000 ÷ $200 = 2,050 client visits
favorable vs unfavorable
favorable: actual revenue is more than budgeted revenue unfavorable: actual revenue is less than budgeted revenue
A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget
planning
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
