Ch. 9 SB & HW Questions
What is combined on a flexible budget performance report?
-activity variances with the revenue and spending variances
What are the reasons for Revenue Variances?
-change in discount structure -change in product mix -change in selling price
Options to generate a favorable revenue and spending variance include:
-increase operating efficiency -protecting the selling price -reduce the prices of input
What are the reasons for Spending Variances?
-input prices -changes in usage -change in technology
What are 3 reasons for preparing a flexible budget with multiple cost drivers?
-multiple cost drivers can lead to more accurate variances -cost formulas are likely to be more accurate -an expense may be expected to vary for more than one reason
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 ________ and _________.
-revenue -variable cost
T OR F: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggest that actual activity was lower than budgeted.
FALSE
What is an unchanged planning budget called?
Static Planning Budget
Increasing the number of clients is one option to generate a favorable out come for what kind of variance?
activity variance
Unfavorable Variance
actual revenue is less than budgeted revenue
Favorable Variance
actual revenue is more than budgeted revenue
What does the variance analysis cycle begin with?
begins with the preparation of performance reports
Variances are a consequence of?
changes in level of activity
Revenues and costs are adjusted as the level of activity changes for what kind of budget?
flexible budget
What do you do to find the activity variance?
flexible budget - planning revenue
What kind of report combines activity and revenue and spending variances?
flexible performance report
What is not a reason for preparing a flexible budget with multiple cost drivers?
it eliminates the need for performing variance analysis
When comparing the static planning budget to actual activity, what problem arises when actual activity is higher than budgeted activity?
net income is higher than expected but all or most expense variances are unfavorable
What is NOT a column on a flexible budget performance report?
net operating income
If the actual cost is greater than what the cost should have bee, what do you label the variance as?
unfavorable
When preparing a flexible budget, the level of activity affects what kind of cost?
variable costs ONLY