Assignment 8-3 ACCT managerial

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

$250 unfavorable (20* 2,500) = 50,000 - 49,750 = 250 U

A favorable activity variance for a cost may not indicate good performance because a favorable activity variance:

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

non profit organizations usually

have a variable and fixed source of revenue, along with having significant funds other than sales

If activity is higher than expected, variable costs should be - than expected; and if activity is lower than expected, variable costs should be _ than expected.

higher, lower

Emphasis of variance analysis cycle is to do what

highlight superior and unsatisfactory results

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

hourly wages

Activity Variance

is difference between the planning budget and the flexible budget

planning budget

is prepared before the period begins and is only valid for only the planned level of activity

Revenue variance

is the difference between the flexible budget and actual results

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

management by exception

When an activity level increases by 15% net operating income in the flexable budget will ordinarily increase by _

more than 15%

Variances are more accurate when using:

multiple cost drivers

flexible budget performance

provides a more valid assesment of performance than simply comparing actual costs to static planning budget costs because actual costs are compared to what costs should have been at the actual level of activity

Difference between what the total sale should have been, given the actual level of activity for the period, and the actual total sale is a _ variance

revenue

A cost center's performance report does not include:

revenue and net operating income

subtracting flexible budget from actual results

revenue and spending variance

an unchanged planning budget is known as a(n) __ planning budget.

static

Flexible budget schedule is an estimate of..

what revenues and costs should have been given the actual level of activity for the period

Unfavorable variance

when revenue is less than budgeted revenue

Favorable variance

when revenue is more than the budgeted revenue

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 Electrical cost = $40 per day * 24 days + $0.15 per client * 2,100 clients = $1,275

If the planned budget revenue for 5,000 units is $120,000, what is the flexible budget revenue if the actual activity is 4,500 units:

$108,000

Common errors in preparing performance reports include:

- assuming all costs are fixed - assuming all costs are variable - assuming all revenue costs will change as activity changes

Options to generate a favorable revenue and spending variance include:

- protecting the selling price - increase operating efficiency - reduce the price of inputs

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

Revenue and spending

What is the revenue variance and activity variance if the planned revenue was $200k, Flexible budget was $225K and actual revenue was $223K.

Revenue variance is $200,000 Unfavorable Activity variance is $25,000 Favorable

the difference between revenue or cost item in the planning budget and the same item in the flexible budget at the actual level of activity is the _ variance

activity

subtracting flexible budget from actual budget

activity variance

Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control.

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

Common errors in preparing performance reports include:

all costs are vairable or all costs are fixed

A spending variance is the difference

between the actual amount of a cost and how much that cost should have been , given the actual level of activity

Revenue Variance is

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

variance analysis cycle does what

evaluates and improves performance

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

favorable Flexible budget revenue is higher than the planning budget revenue. Therefore, it means there is a favorable activity variance

Which is more controllable fixed or variable costs

fixed costs

_ budgets take into account how activity changes in account effect cost

flexible

_ _ takes into account how changes in activity affect cost

flexible budget