Managerial Acct Ch 9 Connect

Comparing actual costs to what the costs should have been for the actual level of activity done is on a(n) ________ budget

Flexible

Estimates of what revenues and costs should have been based on the actual level of activity are shown on the _____ budget

Flexible

Unfavorable variance

Actual revenue is less than budgeted revenue

Nonprofit organizations:

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

Fancy Nails cost formula for electricity is $40 per operating day plus $0.15 per client served. Calculate Fancy Nails' electricity budget in a month when the business is going to be open for 24 days and they expect to serve a total of 2,100 clients

$1,275

If management plans the budget based on 40 hours of operation and weather causes the business to be opened for only 32, what needs to be adjusted on the flexible budget?

Hourly wages

Variances are more accurate when using:

Multiple cost drivers

What items would be omitted on a cost center's performance report?

Net operating income and revenue

A budget that is prepared at the beginning of the period for a specific level of activity is a _____ budget

Planning

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

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

When the planned level of activity is 900 units and the actual level of activity is 1,000 units, the total variable cost for supplies on the flexible budget:

Could be higher or lower on the actual cost of supplies, and should be higher than on the planning budget

Comparing the static planning budget to actual results only makes sense when:

all costs are fixed and the actual activity level is the same as the budgeted activity level

Given planning budget revenue of $284,000 actual revenue of $275,000 and flexible budget revenue of $290,000 there is a(n) ___________ variance

Unfavorable revenue, and Favorable activity

You would expect total ______ cost to be higher in the flexible budget if the activity level for a period is higher than expected

Variable

Companies use the ______ ________ cycle to evaluate and improve performance

Variance Analysis

The percentage change in the net income in the flexible budget is greater than the percentage change in activity due to ________ costs

Fixed

A(n) _______ budget is prepared before the period begins and is only valid for one level of activity

Planning

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

Commission expense is budgeted to be $16,000 at a planned sales level of 4,000 units. If only 2,900 units are sold, how much commission expense will appear on the flexible budget, and is the activity variance favorable or unfavorable?

$11,600 favorable (Flexible budget expense: $16,000/4,000= $4 per unit x 2,900 units = $11,600. since the flexible budget expense < planning budget expense, the variance is favorable )

Unfavorable activity variances may not indicate bad performance because:

Increased activity should result in higher variable costs

The XYZ corporation expected to produce and sell 25 tractors in May but was only able to produce and sell 19. Possible activities variances include

Less factory supplies used, lower factory utility costs, and lower revenue

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

Management by exception

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

Activity variance

Subtract planning budget from flexible budget

Revenue and spending variances

subtract flexible budget from actual results

The planning budget calls for total variable costs for supplies to be $6,250 based on 1,000 units with planned revenue at $24,000. A total of 1,200 units were actually produced and sold. What amounts should appear on the flexible budget?

$28,800 Revenue and $7,500 for supplies

If the activity level for the month is 4,000 units, actual revenue is $6,000 actual variable costs are $0.20 unit and actual fixed costs total $500 which if the following are true?

$4,700 net income, $1,300 in total costs

Revenue on the planning budget is expected to be $380,000 for 1,900 client visits. The revenue on flexible budget is $410,000 showing that there were actually ________ client visits.

2,050

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 a(n) ___________ variance

Activity

Favorable variance

Actual revenue is more than budgeted revenue

Common errors in preparing performance reports include:

Assuming all costs are fixed or assuming all costs are variable

A performance report shows that planned revenue was $200,000, the flexible budget revenue was $225,000 and the actual revenue was $223,000. Which of the following statements are True?

The activity variance is $25,000 and the revenue variance is $2,000 unfavorable

Comparing actual costs to static planning budget costs only makes sense if the costs are:

Fixed

Fancy Nails' budget revenue is $20 per manicure. The budget for June was based on 2,400 manicures. During June, the actual revenue was $49,750 for 2,500 manicures. The revenue variance for June is

$250 Unfavorable (Flexible budget amount for revenue $20 per manicure x 2,500 manicures = $50,000. Revenue variance = $50,000 - $49,750 = $250 U)

A spending variance is the:

difference between what a cost should have been at the actual level of activity and the actual amount of the cost

Fixed costs are often more controllable than variable costs ( T/ F)

True