LearnSmart Chapter 10
An estimate of what revenue and costs should have been, based on the actual level of activity is shown on a _______.
flexible budget
A favorable activity variance may not indicate good performance because a favorable activity variance:
for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity
A cost center's performance report does not include:
net operating income
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
A cost center's performance report does not include:
revenue, net operating income
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 ______ variance.
spending
An unchanged planning budget is known as a(n) _______ planning budget.
static
Unfavorable variance
Actual revenue is less than budgeted revenue
Favorable variance
Actual revenue is more than budgeted revenue
A favorable ______ variance is higher than expected can cause the actual profit to be higher than the budgeted profit.
activity
Common errors in preparing performance reports include:
assuming all costs are fixed or variable
Unfavorable activity variances may not indicate bad performance because:
increased activity should result in higher variable costs
When a static planning budget is compared to actual results at a different activity level:
increases or decreases in net income are not adequately explained, changes in costs are expected due to changes in activity.
Nonprofit organizations:
may have revenue sources that are fixed, usually have significant funding sources other than sales
When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by:
more than 15%