ACCTNG Quiz Chapter 9

A fixed budget is based on a single predicted amount of sales or other activity measure.

A fixed budget is based on a single predicted amount of sales or other activity measure.

Actual costs are determined by plugging the actual level of activity for the period into the cost formulas used in flexible budgets.

False

An activity variance is the difference between an actual revenue or cost and the revenue or cost in the flexible budget that is adjusted for the actual level of activity of the period.

False

Cost variances are ignored under management by exception.

False

Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes.

False

If activity is higher than expected, total fixed costs should be higher than expected. If activity is lower than expected, total fixed costs should be lower than expected.

False

If the actual level of activity is 4% more than planned, then the costs in the static budget should be increased by 4% before comparing them to actual costs.

False

The activity variance for revenue is favorable if the actual revenue for the period exceeds the revenue in the static planning budget.

False

When computing a price variance, the price is held constant.

False

The activity variance for revenue is favorable if the revenue in the flexible budget exceeds the revenue in the static planning budget.

True

To help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity.

True

A flexible budget performance report contains activity variances but not revenue or spending variances.

False

A flexible budget report should exclude variable costs because they can be expected to change with a change in the level of activity.

False

A revenue variance is unfavorable if the revenue in the static planning budget is less than the revenue in the flexible budget.

False

A revenue variance is the difference between what the total sales revenue should be, given the actual level of activity of the period, and the actual total sales revenue.

True

Differences between the static planning budget and the flexible budget show what should have happened because the actual level of activity differed from what had been planned.

True

Fixed costs should not be ignored when evaluating how well a manager has controlled costs.

True

Flexible budgets can be used when there is more than one cost driver (i.e., measure of activity).

True