accounting sb ch9

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

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

Match the comparisons made on the performance report

activity variance --> subtract planning budget from flexible budget revenue and spending variances --> subtract flexible budget from actual results

The variance analysis cycle _____

begins with the preparation of performance reports

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

A revenue variance is the ___

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

favorable vs unfavorable

favorable: actual revenue is more than budgeted revenue unfavorable: actual revenue is less than budgeted revenue

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

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

flexible budget

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

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

Planning budgets are sometimes called ______ budgets

static

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

unfavorable

The prominent difference between performance reports in nonprofit and for-profit organizations is that nonprofit organizations ____

usually receive significant funding from sources other than sales

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 ______

variable cost, revenue

When preparing a flexible budget, the level of activity

affects variable costs only

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

planning

The spending variance is labeled as favorable when the _____

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

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

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

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

$11,600 and favorable Reason: 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

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 $ _____

$15,000 U

Fancy Nails' 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 Reason: Flexible budget amount for revenue = $20 per manicure × 2,500 manicures = $50,000. Revenue variance = $50,000 - $49,750 = $250 U

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 activity variance is $25,000 Favorable - The revenue variance is $2,000 Unfavorable Reason: The activity variance is the difference between the planning budget and the flexible budget Reason: The revenue variance is the difference between the flexible budget and actual results

The flexible budget performance report consists of _____

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

Options to generate a favorable revenue and spending variance include ___

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

Nonprofit organizations ______

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

A cost center's performance report does not include _____

- revenue - net operating income

One option to generate a favorable ______ variance for net operating income is to increase the number of clients

Activity

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 Reason: $380,000 ÷ 1,900 = $200 per client visit. $410,000 ÷ $200 = 2,050 client visits

Performance reports for cost centers ______

do not include revenues or net income Reason: Cost center reports should follow the same principles as reports that include revenue

When actual revenue ______ what the revenue should have been, the variance is labeled favorable

exceeds