BUS 215 - Exam #2

Predetermined Overhead Rate (MOH Budget)

Total MOH / Budgeted DL Hours

T/F: A discrepancy between the budgeted profit and the actual profit can be caused by a decrease in 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 btwn 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) ____ variance

activity

Subtract planning budget from flexible budget

activity variance

difference between the static budget and the flexible budgeted amount

activity variance

In large organizations, many smaller individual budgets submitted by the department heads and other responsible people comprise the ____ budget.

selling and administrative

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

benchmark used in measuring performance is called a

standard

An unchanged planning budget is known as a(n) ___ planning budget.

static

Borrowing money is required whenever:

the cash excess is less than the minimum required cash balance and there is a cash deficiency

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

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

unfavorable

actual revenue is less than budgeted revenue

unfavorable variance

Budgeted expenses for areas other than manufacturing are shown on the ___ budget.

selling and administrative

fixed costs remain

THE SAME !!!

T/F: fixed costs are often more controllable than variable costs

TRUE

subtract flexible budget from actual results

revenue and spending variances

The variance analysis cycle:

begins with the preparation of performance reports

spending variance

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

revenue variance

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

The cost of unsold units is computed on the _____ budget.

ending finished goods inventory

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, revenue and spending variances help explain the difference

actual revenue is more than budgeted revenue

favorable variance

the percentage change in net operating income in the flexible budget is greater than the percentage change in activity due to ___ costs.

fixed. (variable change with activity)

Revenues and costs are adjusted as the level of activity changed on a ___ budget.

flexible

a budget takes into account how costs are affected by changed in level of activity is a ___ budget.

flexible

Options to generate favorable revenue and spending variance include:

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

unfavorable activity variances may not indicate bad performance because:

increased activity should result in higher variable costs

The amount of goods for resale to be purchased from suppliers during the period is shown on the ___ ___ budget

merchandise purchases

when the activity level increases by 15%, NOI in the flexible budget will ordinarily increase by:

more than 15%

a cost centers performance report does not include:

net operating income or revenue

In a manufacturing company, the ___ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory.

production

calculation of a std price per unit of direct materials includes:

purchase discounts, shipping costs, price of materials

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

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