Chapter 21
List characteristics of a flexible budget
- Often based on several levels of activity - Useful for evaluating past performance - Useful to compare what-if scenarios
When compared to the budgeted amount, if the actual cost or revenue contributes to a higher income, then the variance is considered ___________________
Favorable
A(n) ______________ budget is based on one predicted amount of sales or other activity measure.
Fixed
Budget reports are commonly prepared for:
Month, Quarter, Year
The formula to calculate total budgeted costs is:
Total Fixed Cost + (total variable cost per unit x units of activity)
True or false: A flexible budget reporting sales volumes at three different levels will have the same fixed costs.
True
When compared to the budgeted amount, if the actual cost or revenue contributes to a lower income, then the variance is considered
Unfavorable
Management by exception means that managers focus attention on the most significant differences between _______________- costs and ______________ costs.
actual standard
A fixed budget performance report indicates a sales variance of $20,000 favorable. The reason for the variance:
cannot be determined from the fixed budget performance report
A standard cost _____ indicates the amount of direct labor, direct materials and overhead for one unit of product.
card
A fixed budget performance report not only compares results, but also indicates if the variances are:
favorable or unfavorable
A fixed budget performance report compares the:
fixed budget to the actual results
The report that compares actual performance and budgeted performance based on actual activity level is called a ______ budget performance report.
flexible
A(n) ________________ standard is the quantity of material required if the process is 100% efficient without any loss or waste.
ideal
The first step in preparing a flexible budget is to:
identify activity levels
Management by exception means that:
management focuses on the most significant variances
When preparing a flexible budget, variable costs are expressed as a constant amount _____, and fixed costs are expressed as a constant amount _____.
per unit; in total
A(n) ________________ standard is the quantity of material required under normal operations.
practical
A ____________ variance is the difference between the actual quantity of input used and the standard quantity of input that should have been used.
quantity
Budget ___________ compare actual results to budgeted results.
reports
Preset costs for delivering a product or service under normal conditions are called ______________ costs.
standard