Chapter 9 Accounting Smartbook

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. revenue spending activity

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

subtract planning budget from flexible budget subtract flexible budget from actual results

activity variance revenue and spending variances

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

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

favorable

Revenues and costs are adjusted as the level of activity changes on a(n) ______budget.

flexible

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

usually receive significant funding from sources other than sales

Companies use the _____ ____ cycle to evaluate and improve performance.

variance analysis

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? $87,000 and unfavorable $11,600 and favorable $11,600 and unfavorable $4,400 and favorable

$11,600 and favorable

Planning budgets are sometimes called ______ budgets. static flexible

static

The spending variance is labeled as favorable when the ______. - 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 -actual cost is less than what the cost should have been at the planned 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 actual level of activity

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

A cost center's performance report does not include ______. net operating income fixed costs flexible costs

net operating income

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 - difference between the budgeted cost of the item and the actual cost of the item - projected amount to be spent - actual amount spent

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

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

activity

The flexible budget performance report consists of ______. . - revenue and spending variances - the planning budget, flexible budget and actual results - the manager's performance evaluations - activity variances

revenue and spending variances the planning budget, flexible budget and actual results activity variances

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. The actual cost of supplies in June was $2,000. Calculate the spending variance for June. $200 F $200 U $125 U $125 F

$125 U

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

affects variable costs only

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

increase accuracy

actual revenue is less than budgeted revenue actual revenue is more than budgeted revenue

unfavorable variance favorable variance

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

activity variances with the revenue and spending variances

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

begins with the preparation of performance reports

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

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

Performance reports for cost centers _____ 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

Options to generate a favorable revenue and spending variance include ______. increase operating efficiency protecting the selling price increase the number of clients reduce the prices of inputs

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

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

multiple cost drivers

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

planning

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. is less than exceeds is equal to

exceeds

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.

false