Acct- Ch. 9

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

flexible

The flexible budget performance report consists of ______.

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

A cost center's performance report does not include ______.

net operating income revenue

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

Unfavorable variance

Actual revenue is less than budgeted revenue.

Which of the following statements is true?

Fixed costs are often more controllable than variable costs.

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.

One option to generate a favorable ______ 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) ____ 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

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

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

Performance reports for cost centers ______.

do not include revenues or net income

When actual revenue ______ 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.

false

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

A favorable activity variance 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 activity variances may not indicate bad performance because ______.

increased activity should result in higher variable costs

A cost center's performance report does not include ______.

net operating income

The flexible budget ____ report combines activity and revenue and spending variances.

performance

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

planning

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

An unchanged planning budget is known as a(n) ____ planning budget.

static

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

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

variance analysis

If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is ______.

$108,000

Fixed costs are often more controllable than variable costs.

true

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

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?

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

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 unfavorable

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

flexible

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

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

management by exception

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

management by exception

Nonprofit organizations ______.

may have revenue sources that are fixed have significant funding sources besides sales

When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by ______ 15%.

more than

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

Favorable variance

Actual revenue is more than budgeted revenue.

A company's budgeted cost of supplies 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?

$437.50

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 ______.

$7,500 for supplies $28,800 revenue

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

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

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

fixed

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

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

net operating income of $19,500 sales of $44,000

Options to generate favorable revenue and spending variances include ______.

protecting the selling price increasing operating efficiency reducing the prices of inputs

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

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.

revenue and spending