Chapter 21

List characteristics of a flexible budget

- Often based on several levels of activity - Useful for evaluating past performance - Useful to compare what-if scenarios

When compared to the budgeted amount, if the actual cost or revenue contributes to a higher income, then the variance is considered ___________________

Favorable

A(n) ______________ budget is based on one predicted amount of sales or other activity measure.

Fixed

Budget reports are commonly prepared for:

Month, Quarter, Year

The formula to calculate total budgeted costs is:

Total Fixed Cost + (total variable cost per unit x units of activity)

True or false: A flexible budget reporting sales volumes at three different levels will have the same fixed costs.

True

When compared to the budgeted amount, if the actual cost or revenue contributes to a lower income, then the variance is considered

Unfavorable

Management by exception means that managers focus attention on the most significant differences between _______________- costs and ______________ costs.

actual standard

A fixed budget performance report indicates a sales variance of $20,000 favorable. The reason for the variance:

cannot be determined from the fixed budget performance report

A standard cost _____ indicates the amount of direct labor, direct materials and overhead for one unit of product.

card

A fixed budget performance report not only compares results, but also indicates if the variances are:

favorable or unfavorable

A fixed budget performance report compares the:

fixed budget to the actual results

The report that compares actual performance and budgeted performance based on actual activity level is called a ______ budget performance report.

flexible

A(n) ________________ standard is the quantity of material required if the process is 100% efficient without any loss or waste.

ideal

The first step in preparing a flexible budget is to:

identify activity levels

Management by exception means that:

management focuses on the most significant variances

When preparing a flexible budget, variable costs are expressed as a constant amount _____, and fixed costs are expressed as a constant amount _____.

per unit; in total

A(n) ________________ standard is the quantity of material required under normal operations.

practical

A ____________ variance is the difference between the actual quantity of input used and the standard quantity of input that should have been used.

quantity

Budget ___________ compare actual results to budgeted results.

reports

Preset costs for delivering a product or service under normal conditions are called ______________ costs.

standard