prepared before the period begins and is valid for only the planned level of activty
question
Flexible budgets cannot be used when there is more than one cost driver (i.e., measure of activity).
answer
false
question
Which of the following comparisons best isolates the impact of a change in activity on performance?
options
-.master budget and static planning budget
-static planning budget and actual results
-static planning budget and flexible budget
(planning budgets are also called static budgets)
-flexible budget and actual result
answer
static planning budget and flexible budget
question
A budget that is based on the actual activity of a period is known as a: master budget.
answer
flexible budget
question
Which of the following may appear on a flexible budget performance report?
options:
A. an unfavorable spending variance
B. an unfavorable activity variance
C. a favorable revenue variance
D. all of the above may appear on a flexible budget
answer
all of the above may appear on a flexible budget performance report
question
when does favorable (or unfavorable) revenue variance occur
answer
when actual revenue is greater than (or less than) that planning budget
question
when does favorable or (unfavorable) expense variance occur
answer
when actual expenses are less than or (greater than) the planning budget
question
flexible budget
answer
an estimate of what revenues or cost should have been, given the actual activity for the period
question
4 points of FLEXIBLE BUDGETS
answer
- may be prepared for any level of activity in the relevant range
- enable "apples to apples" cost comparisons
- helps managers control costs
- help evaluate managerial performance
question
keys to understanding flexible budgets
answer
* variable cost change in direct proportion to changes in activity
* total fixed costs remain unchanged within the relevant range
question
activity variance
answer
arises due to the difference in the level of activity in the planning budget and the actual level of activity
question
revenue variance
answer
difference between what the total revenue should have been given the actual level of activity for the period, and the actual total revenu
question
spending variance
answer
difference between how much a cost should have been, given the actual level of activity and the actual amount of the cost
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