SB Ch09 A306
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 ______.
$28,800 revenue, $7,500 for supplies
Fixed costs are often more controllable than variable costs. T or F?
True
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. a) activity b) revenue c) spending
activity
An estimate of what revenue and costs should have been, based on the actual level of activity is shown on a ______. a) flexible budget b) profit and loss statement c) planning budget d) fixed budget
flexible budget
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
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 ______. wages of $20,000, rent expense of $2,750, sales of $44,000, net operating income of $19,500
sales of $44,000, net operating income of $19,500
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) ______ spending variance.
spending
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
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? a) The activity variance is $25,000 Favorable. b) The revenue variance is $2,000 Unfavorable. c) The revenue variance is $2,000 Favorable. d) The activity variance is $25,000 Unfavorable.
The activity variance is $25,000 Favorable, The revenue variance is $2,000 Unfavorable.
The spending variance is labeled as favorable when the ______. a) amount spent is less than what was spent last period b) actual cost is less than what the cost should have been at the planned level of activity c) actual cost is more than what the cost should have been at the actual level of activity d) actual cost is less than what the cost should have been at the actual level of activity
actual cost is less than what the cost should have been at the actual level of activity
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. a) planning b) flexible c) strategic
planning
Revenue variances can be caused by ______. poor accounting controls, changes in selling price, changes in the level of activity, changes in the mix of products sold
poor accounting controls, changes in selling price, changes in the mix of products sold
Options to generate favorable revenue and spending variances include ______. a) reducing the prices of inputs b) increasing operating efficiency c) protecting the selling price d) increasing the number of clients
reducing the prices of inputs, increasing operating efficiency, protecting the selling price
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) _____ variable.
revenue
An unchanged planning budget is known as a(n) __________ planning budget.
static
Possible causes of a spending variance include _____. using too many inputs for the actual level of activity, paying less than expected for inputs, producing more or less product than expected, changes in technology
using too many inputs for the actual level of activity, paying less than expected for inputs, changes in technology
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 ______. a) variable cost b) revenue c) fixed cost
variable cost, revenue
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, unfavorable
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
A revenue variance is the ______. a) difference between total revenue in the planning budget and actual total revenue b) difference between what a cost should have been at the actual level of activity and the actual amount of the cost c) the actual total revenue earned d) difference between what revenue should have been at the actual level of activity and the actual revenue
difference between what revenue should have been at the actual level of activity and the actual revenue
A flexible budget performance report combines the ______. manager's performance with the employee's performance, activity variances with the revenue and spending variances, net income for two periods
activity variances with the revenue and spending variances
The flexible budget performance report consists of ______. a) activity variances b) revenue and spending variances c) the manager's performance evaluations d) the planning budget, flexible budget and actual results
activity variances, revenue and spending variances the planning budget, flexible budget, and actual results
The variance analysis cycle ________. a) is used to assign blame for poor performance b) includes the investigation of all variances c) begins with the preparation of performance reports d) begins with the preparation of the budget
begins with the preparation of performance reports
Possible causes of a spending variance include ______. changes in technology, using too many inputs for the actual level of activity, paying less than expected for inputs, producing more or less product than expected
changes in technology, using too many inputs for the actual level of activity, paying less than expected for inputs
A spending variance is the ______. a) difference between the budgeted cost at the budgeted level of activity and the actual amount of the cost b) difference between what a cost should have been at the actual level of activity and the actual amount of the cost c) projected amount to be spent on a cost d) actual amount spent on a cost
difference between what a cost should have been at the actual level of activity and the actual amount of the cost
When actual revenue ______ what the revenue should have been, the variance is labeled favorable.
exceeds
When actual revenue ______ what the revenue should have been, the variance is labeled favorable. a) exceeds b) is less than c) is equal to
exceeds
A budget that takes into account how costs are affected by changes in level of activity is a(n) _______ budget.
flexible
Comparing actual costs to what the costs should have been for the actual level of activity is done on a(n) _______ budget.
flexible
Unfavorable activity variances may not indicate bad performance because _____.
increased activity should result in higher variable costs
Unfavorable activity variances may not indicate bad performance because ______. a) costs should not change as activity changes b) increased activity should result in higher variable costs c) increased activity should result in higher fixed costs
increased activity should result in higher variable costs