ACC 216 Chapter Nine (final exam)

FN budgeted revenue is $20 per manicure. The planning budget for June was based on 2,400 manicures. During June, the actual revenue was $49,750 for 2,500 manicures. The revenue variance for June is:

$250 U Flexible budget amount for revenue = $20 per manicure x 2,500 manicures = 50,000 Revenue Variance = 50,000 = 49,750 = $250 U

Revenues and costs are adjusted as the level of activity changes on a _____ budget:

flexible

Static planning budget:

only considers the planned level of activity

Revenue and spending variances:

subtract flexible budget from actual results

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 _____ variance:

activity

Revenue variance:

difference between the flexible budget and the actual results

Comparing actual costs to static planning budget costs only makes sense if the costs are:

fixed

The concept that focuses on important variances and ignores trivial ones is:

management by exception

Favorable revenue:

more units were sold than expected

An unchanged planning budget is known as a _____ planning budget:

static

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

unfavorable

If activity levels are lower than expected, total ____ costs should be lower than expected:

variable

Companies use the _____ _____ cycle to evaluate and improve performance:

variance analysis

Which of the following statements is true:

fixed costs are often more controllable than variable costs

The flexible budget _____ report combines activity and revenue and spending variances:

performance

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 ______ variance:

revenue

Common errors in preparing performance reports include:

1. assuming all costs are variable 2. assuming all costs are fixed

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:

2,050 $380,000/1,900 = $200 per client visit. $410,000/200 = 2050

no change:

mortgage payment for plant

unfavorable utilities:

plant was in operation for an extra shift each week for increased production

An estimate of what revenue and costs should have been, based on the actual level of activity is shown on a:

flexible budget

If the planned budget revenue for 5,000 units is $120,000, what is the flexible budget revenue if the actual activity is 4,500 units:

$108,000 120,000/5,000 = $24 per unit $24 x 4,500 = 108,000

Activity variance:

difference between the planning budget and the flexible budget

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

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 budgeted at $40,000 and nail technician wages (a variable cost based on number of manicures) was budgeted at $20,000. Actual manicures in March totaled 2,200. Assuming no other expenses, Fancy Nail's flexible budget will show:

1. Sales of $44,000 sales = $20/manicure (40,000/2,000) x 2,200 2. Net operating income of $19,500 $44,000-22,000-2,500

If management plans the budget based on 40 hours of operation and weather causes the business to be opened for only 32, what needs to be adjusted on the flexible budget:

hourly wages

When a static planning budget is compared to actual results at a different activity level:

1. increases or decreases in net income are not adequately explained 2. changes in costs are expected due to changes in activity

Comparing the static planning budget to actual results only makes sense when:

1. the actual activity level is the same as the budgeted activity level 2. all costs are fixed

Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a ______ variance:

1. unfavorable revenue 2. favorable activity

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

fixed

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:

$11,600 and favorable -- Flexible budget expense: $16,000/4000 = $4 per unit x 2,900 units = 11,600... since the flexible budget expense < planning budget expense, the variance is favorable

FN has an estimated cost of 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:

$125 U - flexible budget amounts for supplies: $0.75 x 2,500 manicures = $1,875 Spending variance: $1,875 - $2,000 = $125 U

A company's cost of supplies for 5,000 units is $7,500 of fixed costs plus $1.25 variable costs per unit. What is the increase in the total cost of supplies if 350 more units are sold than expected:

$437.50 350 x $1.25 = 437.50. Fixed costs remains the same

A performance report shows that the planned revenue was $200,000, the flexible budget revenue was $225,000, and the actual revenue was $223,000. Which of the following statements are true:

1. The revenue variance is $2,000 unfavorable - the revenue variance is the difference between the flexible budget and actual results 2. The activity variance is $25,000 favorable - the activity variance is the difference between the planning budget and the flexible budget

a cost center's performance report does not include:

1. revenue 2. net operating income

Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is an ______ variance:

1. unfavorable revenue 2. favorable activity

Nonprofit organizations:

1. usually have significant funding sources other than sales 2. may have revenue sources that are fixed

A favorable activity variance for a cost 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

Unfavorable wages:

increase in employees hours to manufacture additional units

Unfavorable activity variances may not indicate bad performance because:

increased activity should result in higher variable costs

Activity variance:

subtract planning budget from flexible budget

Flexible budget:

takes into account changes in level of activity

If the actual level of activity differs from the level of activity used on the planning budget:

1. variable costs may be lower than expected 2. variable costs may be higher than expected