ACCT 2023 LS CH9

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

the concept that focuses on important variances and ignores trival ones is:

management by exception

Variances are more accurate when using:

multiple cost drivers

A cost center's performance report does not include:

net operating income & revenue

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 ? planning budget

static

if the actual cost is greater than what the cost should have been, the variance is labeled as ?

unfavorable

if activity increases by 20%:

variable costs should increase by 20%

Variance Analysis Cycle:

begins with the preperation of performance reports

when preparing a flexible budget, the level of activity:

affects variable costs only

a flexible budget performance report consists of:

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

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

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

Nonprofit organizations:

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

options to generate a favorable revenue and spending variance include:

-reduce the prices of inputs -increase operating effeciency -protecting the selling price

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 for revenue (24,000/1,000=$24 x 1,200) ; 7,500 for supplies (6.25 x 1,200)

Because of fixed costs, net operating income does not change in proportion to changes in the level of activity which is the ? effect

leverage

T/F: A spending variance is the difference between how much a cost should have been and the actual cost given the actual level of activity.

True

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 activityis a ? variance

activity

when actual revenue ? what the revenue should have been, the variance is labeled favorable

exceeds

Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a ______ variance:

favorable

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

fixed

what costs and revenues should be for the actual level of activity is shown on a ? budget

flexible

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.

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

hourly wages

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 ? variance

revenue

T/F: Activity variances help managers understand why actual net income differs from what it should have been at the actual level of activity

False