learn smart chapter 10
comparing actual costs to static planning budget costs only makes sense if the costs are:
fixed
Comparing actual costs to what the costs should have been for the actual level of activity is done on a _______ budget
flexible
Variances are more accurate when using:
multiple cost drivers
planning budgets are sometimes called ______ budgets
static
revenue and spending variance
subtract flexible budget from actual results
if activity increases by 20%
variable costs should increase by 20%
companies use the _______ ___________ cycle to evaluate and improve performance
variance analysis
the difference between a revenue or cost item in the static planning budget and the same item in the flexible budget at the actual level of activity is an ________ variance
activity
which of the following statements is true?
fixed costs are often more controllable than variable costs
unfavorable variance (revenue)
actual revenue is less than budgeted revenue
favorable variance (revenue)
actual revenue is more than budgeted revenue
Unfavorable activity variances may not indicate bad performance because:
increased activity should result in higher variable costs
Common errors in preparing performance reports include:
-assuming all costs are fixed -assuming all costs are variable
nonprofit organizations:
-may have revenue sources that are fixed -usually have significant funding sources other than sales
A cost center's performance report does not include:
-revenue -net operating income
If the actual level of activity differs from the level of activity used on the planning budget:
-variable costs may be higher than expected -variable costs may be lower than expected
The concept that focuses on important variances and ignores trivial ones is:
management by exception
activity variance
subtract planning budget from flexible budget
if the actual cost is greater than what the cost should have been, the variance is labeled as
unfavorable