LearnSmart Chapter 10

An estimate of what revenue and costs should have been, based on the actual level of activity is shown on a _______.

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

A cost center's performance report does not include:

net operating income

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

A cost center's performance report does not include:

revenue, net operating income

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 ______ variance.

spending

An unchanged planning budget is known as a(n) _______ planning budget.

static

Unfavorable variance

Actual revenue is less than budgeted revenue

Favorable variance

Actual revenue is more than budgeted revenue

A favorable ______ variance is higher than expected can cause the actual profit to be higher than the budgeted profit.

activity

Common errors in preparing performance reports include:

assuming all costs are fixed or variable

Unfavorable activity variances may not indicate bad performance because:

increased activity should result in higher variable costs

When a static planning budget is compared to actual results at a different activity level:

increases or decreases in net income are not adequately explained, changes in costs are expected due to changes in activity.

Nonprofit organizations:

may have revenue sources that are fixed, usually have significant funding sources other than sales

When the activity level increases by 15%, net operating income in the flexible budget will ordinarily increase by:

more than 15%