a306 - test 3 - sb
Many of the schedules in a master budget are based on a variety of management estimates and assumptions. (T/F)
True
If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is Blank______.
$108,000
A budget is a detailed plan for the future that is usually expressed in formal qualitative terms. (T/F)
False, budgets are typically expressed in quantitative terms
The standard hours per unit includes both direct and indirect labor hours. (T/F)
False, it only uses DLH
Which of the following statements is true?
Fixed costs are often more controllable than variable costs.
A favorable activity variance may not indicate good performance because a favorable activity variance Blank______.
for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity
Poor supervision is one possible cause of an unfavorable Blank______ variance.
labor efficiency
The difference between the standard and the actual direct labor wages per hour is reflected in the ______ _______ variance.
labor rate
Risks of not knowing in advance how much labor time will be needed throughout the budget period includes Blank______.
low employee morale erratic layoffs labor shortages
A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the ______ budget.
master (aka: static, planning)
Possible causes of a spending variance include Blank______.
paying less than expected for inputs using too many inputs for the actual level of activity changes in technology
A budget that is prepared at the beginning of the period for a specific level of activity is called a Blank______ budget.
planning
Developing goals and preparing various budgets to achieve those goals is part of Blank______,
planning
Budgets are used for two distinct purposes: Blank______ and Blank______.
planning and controlling
The purchasing manager is generally responsible for the material Blank______.
price variance only
In a manufacturing company, the Blank______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.
production
The budgeted income statement does NOT rely on information from the Blank______ budget.
production
The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget?
production
The direct materials budget directly relies on the Blank______ budget.
production
The materials price variance is generally the responsibility of the Blank______ manager.
purchasing
To calculate total sales on the sales budget, multiply budgeted sales in units by Blank______.
sales price per unit
Budgeted expenses for areas other than manufacturing are shown on the Blank______ budget.
selling and administration
In large organizations, many smaller individual budgets submitted by department heads and other responsible people comprise the Blank______ budget.
selling and administrative
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 amount of an input that should have been used to produce the actual output is known as the ______ quantity or hours allowed.
standard
A budgeted balance sheet is developed using data from the Blank______ of the budget period and data contained in the various schedules.
beginning
The variance analysis cycle Blank______.
begins with the preparation of performance reports
An unfavorable labor efficiency variance can result from Blank______.
faulty equipment poor quality materials unmotivated workers
What is usually the major source of receipts in the receipts section of the cash budget?
sales
Material quantity variances Blank______.
are usually the responsibility of the production manager may be caused by faulty machinery or poor supervision resulting from inferior materials are the responsibility of purchasing department manager
Because it is needed for the schedule of expected cash collections, the annual master budget file includes the _______ ________ from last year.
balance sheet
In a manufacturing company, the _______ _______ budget details the raw materials that must be purchased to fulfill the production budget and to provide for adequate inventories.
direct materials
Which of the following budgets are needed to calculate unit product costs?
direct materials direct labor manufacturing overhead
An estimate of what revenue and costs should have been, based on the actual level of activity is shown on a Blank______.
flexible budget
The materials price variance is Blank______.
generally the responsibility of the purchasing manager impacted by the delivery method chosen charged to the production manager when production problems occur
Unfavorable activity variances may not indicate bad performance because Blank______.
increased activity should result in higher variable costs
The cash budget Blank______.
is prepared near the end of the master budget process
All costs of production other than direct materials and direct labor are shown on the _______ ________ budget.
manufacturing overhead
A materials price variance is equivalent to a labor _____ variance and a materials quantity variance is equivalent to a labor ________ variance.
rate, efficiency
What number does the direct materials budget take directly from the production budget?
required production
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)
revenue
To understand why actual net operating income differs from what it should have been at the actual level of activity, the Blank______ variances should be analyzed.
revenue and spending
The flexible budget performance report consists of Blank______.
revenue and spending variances the planning budget, flexible budget and actual results activity variances
Material requirements plus an allowance for normal inefficiencies are added together to determine the ______ ______ per unit of output for direct materials.
standard quantity
An unchanged planning budget is known as a(n) _____ planning budget
static
An unfavorable materials quantity variance occurs when Blank______.
the actual amount of material used is greater than the standard amount of material allowed for the actual output
A company can repay outstanding principal and interest when Blank______.
the cash excess is greater than the minimum required cash balance
If managers consider it unwise to adjust the workforce in response to changes in workload Blank______.
the direct labor workforce is really fixed in the short run
The same basic formulas used for materials and labor are used to analyze Blank______ portion of manufacturing overhead.
the variable
The spending variance is labeled as favorable when the Blank______.
actual cost is less than what the cost should have been at the actual level of activity
When actual revenue Blank______ 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. (T/F)
false
A budget that takes into account how costs are affected by changes in level of activity is a(n) _____ budget.
flexible
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 $______ ________
$15000 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 Blank______.
$28,800 revenue $7,500 for supplies
The price variance is Blank_____.
(AQ x AP) - (AQ x SP)
The spending variance is Blank_____.
(AQ x AP) - (SQ x SP)
The quantity variance is Blank______.
(AQ x SP) - (SQ x SP)
If a cash budget is prepared by quarter, the beginning cash balance for the year is the same as the beginning cash balance for the _______ quarter and the ending cash balance for the year is the same as the ending cash for the ______ quarter.
1st, 4th
Revenue/Spending Variance =
Actual Budget - Flexible Budget
Which of the following statements are true?
When actual results depart significantly from the standard, the reasons why should be investigated. Standards provide information for measuring performance.
One option to generate a favorable Blank______ 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 a(n) Blank______ variance.
activity
A flexible budget performance report combines the Blank______.
activity variances with the revenue and spending variances
When creating an Excel budget and performing what-if analysis, it is generally easiest to Blank______.
create the budget with a budgeting assumption tab
The ending finished goods inventory budget computes the cost of Blank______ units.
unsold
The standard price of the material is used in the calculation of the material quantity variance because Blank______.
using actual prices would hold the production manager responsible for the inefficiencies of the purchasing manager
Companies use the _____ _____ cycle to evaluate and improve performance.
variance analysis
Master budget schedules Blank______.
answer several key questions for a company are based on estimates and assumptions
Which of the following is needed to calculate raw materials to be purchased on the direct materials budget?
Beginning inventory of raw materials Raw materials required per unit
A price variance is the difference between the Blank______.
actual price and the standard price multiplied by the actual amount of the input
Budgets ______.
and the budgeting process can uncover potential bottlenecks before they occur coordinate the activities of the entire organization by integrating the plans of its various parts define goals and objectives that can serve as benchmarks for evaluating subsequent performance encourage managers to think about and plan for the future
The annual master budget file includes the Blank______ from last year because it is needed for the schedule of expected cash collections.
balance sheet
To prepare a budgeted balance sheet as of December 31, 2023, data is needed from the Blank______ December 31, 2022.
balance sheet as of
The final schedule of the master budget is the Blank______.
budgeted balance sheet
Which of the following budgets shows the company's planned profit and serves as a benchmark against which subsequent company performance can be measured?
budgeted income statement
Which of the following is not found in the financing section of the cash budget?
cash deficiency
Revenue variances can be caused by Blank______.
changes in the mix of products sold poor accounting controls changes in selling price
The number of working hours required to satisfy the production budget is shown on the ______ _______ budget.
direct labor
In a manufacturing company, the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget are all based on the ______ budget.
production
Options to generate favorable revenue and spending variances include Blank______.
protecting the selling price increasing operating efficiency reducing the prices of inputs
The difference between the amount of an input used and the amount that should have been used, all evaluated at the standard price for the input, is called a Blank______ variance.
quantity
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 Blank______.
revenue variable costs
The labor efficiency variance is the difference between actual hours used and standard hours allowed multiplied by the Blank______ hourly rate.
standard
When the actual cost incurred exceeds the standard cost allowed for the actual level of output, the spending variance is Blank______.
unfavorable
When the standard hourly rate is lower than the actual rate, the labor rate variance is Blank______.
unfavorable
Activity variance =
Flexible Budget - Planning Budget
Which of the following statements are true?
How production supervisors use direct labor workers can lead to labor rate variances. Overtime premiums can cause an unfavorable labor rate variance.
Because all other parts of the budget depend on it, if the Blank______ budget is inaccurate, the rest of the budget will be inaccurate.
Sales (Revenue)
The standard hours or quantity allowed for an input is the amount of the input that should have been used to produce the standard output for the period. (T/F)
False, they are used to produce the actual output
The first line of the direct labor budget consists of the budgeted units expected to be Blank______ during the period.
produced
Which of the following budgets are directly based on information from the sales budget?
Selling and administrative expense Production
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 revenue variance is $2,000 Unfavorable. The activity variance is $25,000 Favorable.
A labor efficiency variance is a quantity variance. (T/F)
True
Fixed costs are often more controllable than variable costs. (T/F)
True
The terms price and quantity are used when computing _____ ______ variance, while the terms rate and hours are used when computing ______ ______ variances.
direct materials, direct labor
