AC 204 Chapter 9 Questions

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

False

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

False

A budget that is based on the actual activity of a period is known as a:

Flexible Budget

In a flexible budget, when the activity declines, the total variable cost also declines.

True

What may appear on a flexible budget performance report?

Unfavorable Activity Variance Favorable Revenue Variance Unfavorable Spending Variance

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

Comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control.

True

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

True