M.ACTG Chapter 9 Smart Book

When actual revenue Blank______ what the revenue should have been, the variance is labeled favorable.

exceeds

To understand why actual net operating income differs from what it should have been at the actual level of activity, the Blank______ variances should be analyzed.

revenue and spending

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 Blank______.

variable cost revenue

The spending variance is labeled as favorable when the Blank______.

actual cost is less than what the cost should have been at the actual level of activity

The variance analysis cycle Blank______.

begins with the preparation of performance reports

A favorable activity variance may not indicate good performance because a favorable activity variance Blank______.

for a variable cost will occur simply because the actual level of activity is less than the budgeted level of activity

Unfavorable activity variances may not indicate bad performance because Blank______.

increased activity should result in higher variable costs

The concept that focuses on important variances and ignores trivial ones is Blank______.

management by exception

When comparing the static planning budget to actual activity, a problem that arises when actual activity is higher than budgeted activity is that Blank______.

net income is higher than expected but all or most expense variances are unfavorable

A budget that is prepared before the beginning of the period for a specific level of activity is called a Blank______ budget.

planning

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

More than

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.

activity

When preparing a flexible budget, the level of activity Blank______.

affects variable costs only

A revenue variance is the Blank______.

difference between what revenue should have been at the actual level of activity and the actual revenue

The flexible budget performance report consists of Blank______.

the planning budget, flexible budget and actual results revenue and spending variances activity variances

True or false: 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 lower than budgeted.

False