Chapter 9 Cost Accounting
An activity variance is due to the difference between the level of activity used in the flexible budget and the actual level of activity
False
When using a flexible budget, a decrease in activity within the relevant range:
Decreases total costs
A favorable spending variance occurs when the actual cost is less than the amount of the cost in the static planning budget.
False
A flexible budget performance report contains activity variances but not revenue or spending variances.
False
A revenue variance is favorable if the actual revenue is greater than the revenue in the static planning budget.
False
A spending variance is the difference between the amount of the cost in the static planning budget and the amount of the cost in the flexible budget.
False
A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period
False
An activity variance is the difference between an actual revenue or cost and the revenue or cost in the flexible budget that is adjusted for the actual level of activity of the period.
False
An unfavorable activity variance indicates that activity was too high for the amount of sales.
False
Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control
False
Directly comparing static budget costs to actual costs only makes sense if the costs are variable.
False
If activity is higher than expected, total fixed costs should be higher than expected. If activity is lower than expected, total fixed costs should be lower than expected.
False
If the actual level of activity is 4% more than planned, then the costs in the static budget should be increased by 4% before comparing them to actual costs.
False
A budget that is based on the actual activity of a period is known as a:
Flexible Budget
Comparing actual results to a budget based on the actual activity for the period is possible with the use of a:
Flexible budget
Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance?
Flexible budget and Actual results
Flexible budgets can be used when there is more than one cost driver (i.e., measure of activity).
True
In a flexible budget, what will happen to fixed costs as the activity level increases?
The fixed cost per unit will decrease.
A revenue variance is favorable if the actual revenue exceeds what the revenue should have been for the actual level of activity of the period.
True
An expense can be driven by more than one cost driver.
True
An unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed.
True
An unfavorable spending variance may reflect waste as well as paying too much for inputs.
True
Comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control.
True
Controllability has little to do with whether a cost is fixed or variable.
True
Fixed costs should be included in a flexible budget even though they do not change when the level of activity changes.
True
Fixed costs should not be ignored when evaluating how well a manager has controlled costs.
True
Fixed costs should usually be included in performance reports because fixed costs are generally controllable.
True
In a flexible budget, when the activity declines, the total variable cost also declines.
True
The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity.
True
To help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity.
True
When the activity measure is the number of units sold, the revenue variance is favorable if the average actual selling price is greater than expected.
True
A major weakness of flexible budgets is that:
none of these is a major weakness of flexible budgets.
