Chapter 23

Question 1

Actual total overhead incurred minus budgeted total overhead. Equals the sum of both overhead spending variances (variable and fixed) and the variable overhead efficiency variance

Answer 1

Controllable variance

Question 2

Difference between the actual incurred cost and the standard cost.

Answer 2

Cost variance

Question 3

Difference between the actual quantity of an input and the standard quantity of that input.

Answer 3

Efficiency variance

Question 4

Difference in actual revenues or expenses from the budgeted amount that contributes to a higher income.

Answer 4

Favorable variance

Question 5

Planning budget based on a single predicted amount of volume; unsuitable for evaluations if the actual volume differs from predicted volume; also called a static budget.

Answer 5

Fixed budget

Question 6

Planning budget based on several predicted amounts of sales or other activity measure; also called a variable budget.

Answer 6

Flexible budget

Question 7

Management process to focus on significant variances and give less attention to areas where performance is close to the standard.

Answer 7

Management by exception

Question 8

Difference between actual and budgeted revenue or cost caused by the difference between the actual price per unit and the budgeted price per unit.

Answer 8

Price variance

Question 9

Difference between actual and budgeted revenue or cost caused by the difference between the actual number of units and the budgeted number of units.

Answer 9

Quantity variance

Question 10

Difference between the actual price paid for something and the expected price, multiplied by the actual quantity purchased.

Answer 10

Rate variance

Question 11

Occurs when management pays an amount different from the standard price to acquire an item.

Answer 11

Spending variance

Question 12

Costs that should be incurred under normal conditions to produce a product or component or to perform a service.

Answer 12

Standard costs

Question 13

Difference in revenues or costs, when the actual amount is compared to the budgeted amount, that contributes to a lower income.

Answer 13

Unfavorable variance

Question 14

Process of examining differences between actual and budgeted revenues or costs and describing them in terms of price and quantity differences.

Answer 14

Variance analysis

Question 15

Occurs when the company operates at a different capacity level than was predicted

Answer 15

Volume variance