Accounting Chapter 9

True or false: 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. True False

False

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

When actual revenue ______ what the revenue should have been, the variance is labeled favorable. Multiple choice question. exceeds is less than is equal

exceeds

The concept that focuses on important variances and ignores trivial ones is ______. Multiple choice question. the variance analysis cycle management by exception flexible budgeting static budgeting

management by exception

The percentage change in net income in the flexible budget is greater than the percentage change in activity due to ______________ costs.

fixed

Companies use the _____________ __________________ cycle to evaluate and improve performance

variance analysis

Variances are more accurate when using ______. Multiple choice question. multiple cost drivers a single cost driver

multiple

Select all that apply 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 ______. Multiple select question. fixed cost revenue variable cost

revenue variable cost

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. Multiple choice question. both revenue and spending and activity activity revenue and spending

revenue and spending

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. Multiple choice question. both revenue and spending and activity revenue and spending activity

revenue and spending

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(n) ____________________ variance

spending

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(n) _________________variance

spending

Select all that apply Nonprofit organizations ______. Multiple select question. usually have significant funding sources other than sales may have revenue sources that are fixed never have variable revenue sources never have costs

usually have significant funding sources other than sales may have revenue sources that are fixed

One option to generate a favorable ______ variance for net operating income is to increase the number of clients. Multiple choice question. revenue and spending activity

activity

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 budget that takes into account how costs are affected by changes in level of activity is a(n) ______________ budget

flexible

A budget that is prepared at the beginning of the period for a specific level of activity is called a ______ budget. Multiple choice question. planning flexible strategic

planning

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 a(n) ______ variance. Multiple choice question. spending activity revenue

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 a(n) _______________ variance

activity

Comparing actual costs to what the costs should have been for the actual level of activity is done on a(n) _______________________ budget

flexible

Estimates of what revenues and costs should have been based on the actual level of activity are shown on the _____________________ budget

flexible

The system that compares actual results to a budget so that significant deviations can be flagged and investigated further is called ________________ _________________ ___________________

management by exception

A flexible budget performance report combines the ______. Multiple choice question. activity variances with the revenue and spending variances manager's performance with the employee's performance net income for two periods

activity variances with the revenue and spending variances

A flexible budget performance report combines the ______. Multiple choice question. manager's performance with the employee's performance activity variances with the revenue and spending variances net income for two periods

activity variances with the revenue and spending variances

A spending variance is the ______. Multiple choice question. projected amount to be spent difference between what a cost should have been at the actual level of activity and the actual amount of the cost difference between the budgeted cost of the item and the actual cost of the item actual amount spent

difference between what a cost should have been at the actual level of activity and the actual amount of the cost

When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by ______ 15%. Multiple choice question. more than less than exactly

more than Net operating income will increase by more than 15% because fixed costs do not increase with changes in activity.

Unfavorable activity variances may not indicate bad performance because ______. increased activity should result in higher fixed costs costs should not change as activity changes increased activity should result in higher variable costs

increased activity should result in higher variable costs

Because of fixed costs, net operating income does not change in proportion to changes in the level of activity which is called the ___________________ effect

leverage

An unchanged planning budget is known as a(n) ______________ planning budget

static

Fancy Nails cost formula for electricity is $40 per operating day plus $0.15 per client served. Calculate Fancy Nails' electricity budget in a month when the business is going to be open for 24 days and they expect to serve a total of 2,100 clients. Multiple choice question. $315 $1,275 $960

$1,275

Select all that apply If the activity level for the month is 4,000 units, actual revenue is $6,000, actual variable costs are $0.20 unit, and actual fixed costs total $500, which of the following are true? Multiple select question. $4,200 net income $1,300 in total costs $800 in total costs $4,700 net income

$1,300 in total costs $4,700 net income

Commission expense is budgeted to be $16,000 at a planned sales level of 4,000 units. If only 2,900 units are sold, how much commission expense will appear on the flexible budget, and is the activity variance favorable or unfavorable? Multiple choice question. $87,000 and unfavorable $11,600 and favorable $4,400 and favorable $11,600 and unfavorable

$11,600 and favorable Flexible budget expense: $16,000 ÷ 4,000 = $4 per unit × 2,900 units = $11,600. Since the flexible budget expense < planning budget expense, the variance is favorable.

Fancy Nails has an estimated cost for supplies of $0.75 per manicure. June's budget was based on 2,400 manicures and a total cost for supplies of $1,800. June's actual activity was 2,500 manicures. Total cost of supplies in June was $2,000. Calculate the spending variance for June. Multiple choice question. $200 F $125 U $125 F $200 U

$125 U $0.75 × 2,500 manicures = $1,875. Spending variance: $1,875 - $2,000 = $125 U.

A company's cost of supplies for when 5,000 units are sold is $7,500 of fixed costs plus $1.25 variable cost per unit. What is the increase in the total cost of supplies if 350 more units are sold than expected? Multiple choice question. $962.50 $437.50 The cost remains the same.

$437.50

Select all that apply 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 ______. Multiple select question. $24,000 revenue $7,500 for supplies $28,800 revenue $6,250 for supplies Need help? Review these conce

$7,500 for supplies $28,800 revenue

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 $ ____________________ And (U/F) _____________________

15,000 U

Revenue on the planning budget is expected to be $380,000 for 1,900 client visits. The revenue on the flexible budget is $410,000, showing that there were actually ______ client visits. Multiple choice question. 2,050 1,950 2,000

2,050

Activity variance matches Revenue and spending variances matches Choice, Subtract planning budget from flexible budget Subtract planning budget from flexible budget Revenue and spending variances matches Choice, Subtract flexible budget from actual results Subtract flexible budget from actual results

Activity variance matches Subtract planning budget from flexible budget Subtract planning budget from flexible budget Revenue and spending variances matches Subtract flexible budget from actual results Subtract flexible budget from actual results

True or false: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was lower than budgeted. True false question. True False

False

Which of the following statements is true? Multiple choice question. It is easier to significantly reduce variable costs than to reduce fixed costs. A cost is fixed if it is proportional to activity. Fixed costs are often more controllable than v

Fixed costs are often more controllable than variable costs.

Select all that apply 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? Multiple select question. The activity variance is $25,000 Favorable. The revenue variance is $2,000 Unfavorable. The activity variance is $25,000 Unfavorable. The revenue variance is $2,000 Favorable.

The activity variance is $25,000 Favorable. The revenue variance is $2,000 Unfavorable.

Question Mode Multiple Select Question Select all that apply 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? Multiple select question. The revenue variance is $2,000 Favorable. The revenue variance is $2,000 Unfavorable. The activity variance is $25,000 Favorable. The activity variance is $25,000 Unfavorable.

The revenue variance is $2,000 Unfavorable. The activity variance is $25,000 Favorable.

The spending variance is labeled as favorable when the ______. Multiple choice question. actual cost is less than what the cost should have been at the actual level of activity amount spent is less than what was spent last period actual cost is less than what the cost should have been at the planned level of activity actual cost is more than what the cost should have been at the actual level of activity

actual cost is less than what the cost should have been at the actual level of activity

A spending variance is the ______. Multiple choice question. projected amount to be spent difference between the budgeted cost of the item and the actual cost of the item difference between what a cost should have been at the actual level of activity and the actual amount of the cost actual amount spent

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 ______. Multiple choice question. actual total revenue earned difference between what revenue should have been at the actual level of activity and the actual revenue difference between total revenue in the planning budget and actual total revenue difference betwee

difference between what revenue should have been at the actual level of activity and the actual revenue

A favorable activity variance may not indicate good performance because a favorable activity variance ______. Multiple choice question. for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity may occur simply because the purchasing department acquired low quality supplies at a discount for a fixed cost will occur simply because the actual level of activity is less than the budgeted level of activity

for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity

Using multiple cost drivers on a flexible budget report will generally ______. Multiple choice question. not impact the planning budget increase accuracy have no impact on expected or actual net income

increase accuracy

Select all that apply Options to generate a favorable revenue and spending variance include ______. Multiple select question. increase operating efficiency protecting the selling price reduce the prices of inputs increase the number of clients

increase operating efficiency protecting the selling price reduce the prices of inputs

When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that ______. Multiple choice question. net income is lower than expected but all or most expense variances are favorable net income is higher than expected but all or most expense variances are unfavorable there are no revenue or expense variances

net income is higher than expected but all or most expense variances are unfavorable

Question Mode Multiple Select Question Select all that apply A cost center's performance report does not include ______. Multiple select question. costs net operating income variances revenue

net operating income revenue

True or false: Fixed costs are often more controllable than variable costs. True false

true

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

unfavorable

Question Mode Multiple Choice Question Performance reports for cost centers ______. Multiple choice question. are not common in most organizations are significantly different than reports prepared for other departments do not include revenues or net income

do not include revenues or net income

Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a(n) ____________ activity variance.

favorable

One option to generate a favorable ______ variance for net operating income is to increase the number of clients. Multiple choice question. activity revenue and spending

activity

When preparing a flexible budget, the level of activity ______. Multiple choice question. affects variable costs only affects both fixed and variable costs affects fixed costs only has no effect on costs

affects variable costs only

A revenue variance is the ______. Multiple choice question. difference between what a cost should have been at the actual level of activity and the actual amount of the cost difference between total revenue in the planning budget and actual total revenue actual total revenue earned difference between what revenue should have been at the actual level of activity and the actual revenue

difference between what revenue should have been at the actual level of activity and the actual revenue

The variance analysis cycle ______. Multiple choice question. includes the investigation of all variances begins with the preparation of the budget is used to assign blame for poor performance begins with the preparation of performance reports

begins with the preparation of performance reports

The prominent difference between performance reports in nonprofit and for-profit organizations is that nonprofit organizations ______. Multiple choice question. rarely have any fixed costs generally do not compute revenue and spending variances usually receive significant funding from sources other than sales

usually receive significant funding from sources other than sales