smartbook ch 9

A performance report shows that the planning revenue was $240,000, the flexible budget revenue was $225,000, and actual revenue was $230,000. The activity variance is

$15,000 unfavorable

The planning budget, based on 1,000 units, shows revenue of $24,000 and $6,250 for supplies. A total of 1,200 units were actually produced and sold. The flexible budget will show

$7,500 for supplies $28,800 revenue

Revenue and spending variances

Subtract flexible budget from actual results

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

The activity variance is $25,000 Favorable; The revenue variance is $2,000 Unfavorable

One option to generate a favorable ______ variance for net operating income is to increase the number of clients

activity

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 an

activity variance

A flexible budget performance report combines the

activity variances with the revenue and spending variances

The flexible budget performance report consists of

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

The spending variance is labeled as favorable when the

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

When preparing a flexible budget, the level of activity

affects variable costs only

The variance analysis cycle

begins with the preparation of performance reports

Possible causes of a spending variance include

changes in technology, paying less than expected for inputs, using too many inputs for the actual level of activity

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

A revenue variance is the

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

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

exceeds

Activity variances help managers understand why actual net income differs from what it should have been at the actual level of activity. True false question.

false

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

flexible budget

Comparing actual costs to what the costs should have been for the actual level of activity is done 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

Options to generate a favorable revenue and spending variance include

increase operating efficiency, protecting the selling price, reduce the prices of inputs

Unfavorable activity variances may not indicate bad performance because

increased activity should result in higher variable costs

Revenue variances can be caused by

poor accounting controls, changes in selling price, changes in the mix of products sold

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

revenue and spending

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

revenue variance

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

revenue, variable cost

Companies use the _______________ cycle to evaluate and improve performance

variance analysis

Activity variance

Subtract planning budget from flexible budget

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

spending variance

Planning budgets are sometimes called

static budgets

Fixed costs are often more controllable than variable costs

true

Which of the following statements is true?

Fixed costs are often more controllable than variable costs.

An unchanged planning budget is known as a ___________ planning budget.

static

Fancy Nail's monthly rent is $2,500. The company's static budget for March was based on the activity level of 2,000 manicures. Total sales was budgeted at $40,000 and nail technician wages (a variable cost based on the number of manicures) was budgeted at $20,000. Actual manicures in March totaled 2,200. Assuming no other expenses, Fancy Nails' flexible budget will show

net operating income of $19,500 sales of $44,000