learn smart chapter 10

comparing actual costs to static planning budget costs only makes sense if the costs are:

fixed

Comparing actual costs to what the costs should have been for the actual level of activity is done on a _______ budget

flexible

Variances are more accurate when using:

multiple cost drivers

planning budgets are sometimes called ______ budgets

static

revenue and spending variance

subtract flexible budget from actual results

if activity increases by 20%

variable costs should increase by 20%

companies use the _______ ___________ cycle to evaluate and improve performance

variance analysis

the difference between a revenue or cost item in the static planning budget and the same item in the flexible budget at the actual level of activity is an ________ variance

activity

which of the following statements is true?

fixed costs are often more controllable than variable costs

unfavorable variance (revenue)

actual revenue is less than budgeted revenue

favorable variance (revenue)

actual revenue is more than budgeted revenue

Unfavorable activity variances may not indicate bad performance because:

increased activity should result in higher variable costs

Common errors in preparing performance reports include:

-assuming all costs are fixed -assuming all costs are variable

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

If the actual level of activity differs from the level of activity used on the planning budget:

-variable costs may be higher than expected -variable costs may be lower than expected

The concept that focuses on important variances and ignores trivial ones is:

management by exception

activity variance

subtract planning budget from flexible budget

if the actual cost is greater than what the cost should have been, the variance is labeled as

unfavorable