smartbook ch 9
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 unfavorable
The planning budget, based on 1,000 units, shows revenue of $24,000 and $6,250 for supplies. A total of 1,200 units were actually produced and sold. The flexible budget will show
$7,500 for supplies $28,800 revenue
Revenue and spending variances
Subtract flexible budget from actual results
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
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 an
activity variance
A flexible budget performance report combines the
activity variances with the revenue and spending variances
The flexible budget performance report consists of
activity variances; the planning budget, flexible budget and actual results; revenue and spending variances
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
When preparing a flexible budget, the level of activity
affects variable costs only
The variance analysis cycle
begins with the preparation of performance reports
Possible causes of a spending variance include
changes in technology, paying less than expected for inputs, using too many inputs for the actual level of activity
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
A revenue variance is the
difference between what revenue should have been at the actual level of activity and the actual revenue
When actual revenue ______ what the revenue should have been, the variance is labeled favorable
exceeds
Activity variances help managers understand why actual net income differs from what it should have been at the actual level of activity. True false question.
false
An estimate of what revenue and costs should have been, based on the actual level of activity is shown on a
flexible budget
Comparing actual costs to what the costs should have been for the actual level of activity is done 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
Options to generate a favorable revenue and spending variance include
increase operating efficiency, protecting the selling price, reduce the prices of inputs
Unfavorable activity variances may not indicate bad performance because
increased activity should result in higher variable costs
Revenue variances can be caused by
poor accounting controls, changes in selling price, changes in the mix of products sold
To understand why actual net operating income differs from what it should have been at the actual level of activity, the ______ variances should be analyzed
revenue and spending
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
revenue variance
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
revenue, variable cost
Companies use the _______________ cycle to evaluate and improve performance
variance analysis
Activity variance
Subtract planning budget from flexible budget
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
spending variance
Planning budgets are sometimes called
static budgets
Fixed costs are often more controllable than variable costs
true
Which of the following statements is true?
Fixed costs are often more controllable than variable costs.
An unchanged planning budget is known as a ___________ planning budget.
static
Fancy Nail's monthly rent is $2,500. The company's static budget for March was based on the activity level of 2,000 manicures. Total sales was budgeted at $40,000 and nail technician wages (a variable cost based on the number of manicures) was budgeted at $20,000. Actual manicures in March totaled 2,200. Assuming no other expenses, Fancy Nails' flexible budget will show
net operating income of $19,500 sales of $44,000