CH 10

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

exceeds

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

fixed

If activity increases by 20%:

variable costs should increase by 20%

nonprofit organizations:

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

flexible budget

A report showing estimates of what revenues and costs should have been, given the actual level of activity for the period.

Activity Variance

The difference between a revenue or cost item in the flexible budget and the same item in the static planning budget

Revenue Variance

The difference between the actual revenue for the period and how much the revenue should have been, given the actual level of activity.

Planning Budget

a budget created at the beginning of the budgeting period that is valid only for the planned level of activity

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

management by exception

A cost center's performance report does not include:

net operating income

The difference between what the total sales should have been, give the actual level of a period, and the actual total sales is a _____________ variance.

revenue

Planning budgets are sometimes called _____________ budgets.

static

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

the actual activity level is the same as the budgeted activity level

Spending Variance

the difference between the actual amount of the cost and how much a cost should have been, given the actual level of activity

You would expect total _____________ costs to be higher in the flexible budget if the activity level for a period is higher than expected.

variable