ATCG CH 9

---- budget is the best estimate of hat revenues and costs should have been, given the actual level of activity

flexible budget

a ----- budget shows what costs should be for the actual level of actvity

flexible budget

an unfavorable revenue ---- indicates revenue was less than expected, given the actual level of activity

variance

Fill in the Blank Question Fill in the blank question. Companies use the ----- ----- cycle to evaluate and improve performance.

variance analysis

companies use the --- cycle to evaluate and improve performance

variance analysis cycle

it is solely by the difference between the actual and planned levels of activity

activity variance

the difference between the amount of revenue or expense in the flexible budget and the planning budget

activity variance

----- show how a revenue or cost should have changed in response to the difference between actual and planned activity

activity variances

------- arise by comparing the flexible budget to the planning budget

activity variances

A flexible budget performance report combines the Blank______. Multiple choice question. net income for two periods activity variances with the revenue and spending variances manager's performance with the employee's performance

b

A spending variance is the difference between Blank______. Multiple choice question. the budgeted cost on the planning budget and the budgeted cost on the flexible budget what a cost should have been at the actual level of activity and the actual amount of the cost the budgeted cost on the planning budget and the actual amount of the cost

b

Performance reports for cost centers Blank______. Multiple choice question. are not common in most organizations do not include revenues or net income are significantly different than reports prepared for other departments

b

Using multiple cost drivers on a flexible budget report will generally Blank______. Multiple choice question. not impact the planning budget increase accuracy have no impact on expected or actual net income

b

A cost center's performance report does not include Blank______. Multiple select question. variances net operating income costs revenue

b d

Multiple Select Question Select all that apply 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 Blank______. Multiple select question. $24,000 revenue $7,500 for supplies $6,250 for supplies $28,800 revenue

b d

The spending variance is labeled as favorable when the actual cost is Blank______ level of activity. Multiple choice question. more than what the cost should have been at the planned less than what the cost should have been at the planned less than what the cost should have been at the actual more than what the cost should have been at the actual

c

When a change in sales mix causes the average selling price to be Blank______ the amount expected, the revenue variance is labeled favorable. Multiple choice question. equal to higher than lower than

c

When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by Blank______ 15%. Multiple choice question. less than exactly more than

c

The percentage change in net income in the flexible budget is generally greater than the percentage change in activity due to Blank______. Multiple select question. revenue variable costs fixed costs mixed costs

c d

when a company uses multiple ----- to compare its actual results to the budget, it should provide more accurate and insightful variances than those computed using only one cost driver

cost drivers

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

flexible

Fancy Nails cost formula for miscellaneous expenses is $30 per operating day plus $0.25 per client served. Fancy Nails' miscellaneous expense budget in a month when the business is going to be open for 25 days and they expect to serve a total of 2,400 clients is $

$1350

Fill in the Blank Question Fill in the blank question. 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

A flexible budget performance report combines the Blank______. Multiple choice question. activity variances with the revenue and spending variances manager's performance with the employee's performance net income for two periods

a

A revenue variance is the Blank______. Multiple choice question. difference between the actual total revenue and what the total revenue should have been, given the actual level of activity for the period. difference between what a cost should have been at the actual level of activity and the actual amount of the cost actual total revenue earned difference between total revenue in the planning budget and actual total revenue

a

When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that Blank______. Multiple choice question. net income is higher than expected but all or most expense variances are unfavorable net income is lower than expected but all or most expense variances are favorable there are no revenue or expense variances

a

actual revenues and costs differ from budgeted revenues and costs for a variety of reasons, but the biggest is a change in what?

a change in the level of activity

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 Blank______ budgeted activity. Multiple choice question. lower than equal to higher than

c

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 Blank______ client visits. Multiple choice question. 1,950 2,000 2,050

c

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) Blank______ variance. Multiple choice question. revenue spending activity

c

The variance analysis cycle Blank______. Multiple choice question. is used to assign blame for poor performance begins with the preparation of the budget begins with the preparation of performance reports includes the investigation of all variances

c

planning budgets, flexible budgets, and flexible budget performance reports can be prepared using more than one -----

cost driver

----- by exception is a management system that compares actual results to a budget so significant deviations can be flagged as exceptions and investigated

management by exception

a management system that compares actual results to a budget so significant deviations can be flagged as exceptions and investigated

management by exception

a budget created before the period begins that is valid only for the planned level of activity

planning 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 the actual amount of revenue and how much it should have been, given the actual level of activity

revenue variance

note that the term revenue is used in the planning budget rather than ----

sales

Fill in the Blank Question Fill in the blank question. 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

a favorable ----- variance indicates the cost was less than expected, given the actual level of activity

spending

an unfavorable ---- variance indicates the cost was greater than expected, given the actual level of activity

spending

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

spending variance

directly comparing actual revenues and costs to ---- planning budget revenues and costs can easily lead to erroneous conclusions

static

Fill in the Blank Question Fill in the blank question. If the actual cost is greater than what the cost should have been, the variance is labeled as . (

unfavorable

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

unfavorable

revenue and spending variances arise when comparing actual results to the ----- budget

flexible budget

when a --- budget is used in performance evaluation, actual costs are compared to what the costs should have been for the actual level of activity

flexible budget

a budget showing what revenues and costs should have been, given the actual level of activity

flexible budget

A spending variance is the difference between Blank______. Multiple choice question. what a cost should have been at the actual level of activity and the actual amount of the cost the budgeted cost on the planning budget and the budgeted cost on the flexible budget the budgeted cost on the planning budget and the actual amount of the cost

a

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 Blank______ budgeted activity. Multiple choice question. higher than lower than equal to

a

Fancy Nails has an estimated cost for 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. The actual cost of supplies in June was $2,000. Calculate the spending variance for June. Multiple choice question. $200 F $125 U $200 U $125 F

b

If the planned budget revenue for 5,000 units is $120,000, the flexible budget revenue for 4,500 units is Blank______. Multiple choice question. $180,000 $108,000 $120,000 $118,000

b

One option to generate a favorable Blank______ variance for net operating income is to increase the number of clients. Multiple choice question. revenue and spending activity

b

a favorable revenue ---- indicates revenue was larger than expected, given the actual level of activity

variance

Fancy Nails cost formula for electricity is $40 per operating day plus $0.15 per client served. Calculate Fancy Nails' electricity budget in a month when the business is going to be open for 24 days and they expect to serve a total of 2,100 clients. Multiple choice question. $1,275 $960 $315

a

To improve accuracy, variances on a flexible budget should generally be calculated using: Multiple choice question. multiple cost drivers a single cost driver

a

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? Multiple select question. The activity variance is $25,000 Favorable. The revenue variance is $2,000 Unfavorable. The revenue variance is $2,000 Favorable. The activity variance is $25,000 Unfavorable.

a b

Options to generate favorable revenue and spending variances include Blank______. Multiple select question. protecting the selling price reducing the prices of inputs increasing operating efficiency increasing the number of clients

a b c

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 Blank______. Multiple select question. net operating income of $19,500 rent expense of $2,750 sales of $44,000 wages of $20,000

a c

The flexible budget performance report consists of Blank______. Multiple select question. revenue and spending variances the manager's performance evaluations activity variances the planning budget, flexible budget and actual results

a c d

Comparing actual costs to what the costs should have been for the actual level of activity is done on a(n) ---- budget.

flexible

a ---- budget shows what revenues and costs should have been, given the actual level of activity

flexible budget

a ----- budget is a budget that is adjusted to the actual level of activity

flexible budget

a ------ budget performance report combines activity variances and revenue and spending variances

flexible budget

---- budgets take into account how the actual level of activity should affect costs

flexible budgets

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 -- budget can be compared to the budget from the beginning of the period or to the actual results

flexible budget

----- budgets enable managers to isolate the various causes of the differences between budgeted and actual revenues and costs

flexible budgets