Chapter 7 Flashcards
The master budget is: A) a flexible budget B) a static budget C) developed at the end of the period D) based on the actual level of output
B) a static budget
A flexible budget:
A) is another name for management by exception
B) is developed at the end of the period
C) is based on the budgeted level of output
D) provides favorable operating results
B) is developed at the end of the period
Management by exception is the practice of concentrating on: A) the master budget B) areas not operating as anticipated C) favorable variances D) unfavorable variances
B) areas not operating as anticipated
A variance is:
A) the gap between an actual result and a benchmark amount
B) the required number of inputs for one standard output
C) the difference between an actual result and a budgeted amount
D) the difference between a budgeted amount and a standard amount
C) the difference between an actual result and a budgeted amount
An unfavorable variance indicates that:
A) actual costs are less than budgeted costs
B) actual revenues exceed budgeted revenues
C) the actual amount decreased operating income relative to the budgeted amount
D) All of these answers are correct.
C) the actual amount decreased operating income relative to the budgeted amount
A favorable variance indicates that:
A) budgeted costs are less than actual costs
B) actual revenues exceed budgeted revenues
C) the actual amount decreased operating income relative to the budgeted amount
D) All of these answers are correct.
B) actual revenues exceed budgeted revenues
Bowden Corporation used the following data to evaluate their current operating system. The company
sells items for $20 each and used a budgeted selling price of $20 per unit.
Actual Budgeted
Units sold 46,000 units 45,000 units
Variable costs $225,400 $216,000
Fixed costs $47,500 $50,000
7) What is the static-budget variance of revenues?
A) $20,000 favorable
B) $20,000 unfavorable
C) $2,000 favorable
D) $2,000 unfavorable
A) (46,000 units × $20) - (45,000 units × $20) = $20,000 F
Bowden Corporation used the following data to evaluate their current operating system. The company
sells items for $20 each and used a budgeted selling price of $20 per unit.
Actual Budgeted
Units sold 46,000 units 45,000 units
Variable costs $225,400 $216,000
Fixed costs $47,500 $50,000
What is the static-budget variance of variable costs? A) $1,200 favorable B) $9,400 unfavorable C) $20,000 favorable D) $1,200 unfavorable
B) $225,400- $216,000 = $9,400 U
Bowden Corporation used the following data to evaluate their current operating system. The company
sells items for $20 each and used a budgeted selling price of $20 per unit.
Actual Budgeted
Units sold 46,000 units 45,000 units
Variable costs $225,400 $216,000
Fixed costs $47,500 $50,000
What is the static-budget variance of operating income? A) $10,600 favorable B) $10,600 unfavorable C) $13,100 favorable D) $13,100 unfavorable
C) $13,100 favorable
Actual Static Static-budget Results Budget Variance Units sold 46,000 45,000 0 Revenues $920,000 $900,000 $20,000 F Variable costs 225,400 216,000 9,400 U Contribution margin$694,600 $684,000 10,600 F Fixed costs 47,500 50,000 (2,500) F Operating income $647,100 $634,000 $13,100 F
Caan Corporation used the following data to evaluate their current operating system. The company sells
items for $20 each and used a budgeted selling price of $20 per unit.
Actual Budgeted
Units sold 200,000 units 203,000 units
Variable costs $1,250,000 $1,500,000
Fixed costs $ 925,000 $ 900,000
10) What is the static-budget variance of revenues?
A) $60,000 favorable
B) $60,000 unfavorable
C) $6,000 favorable
D) $6,000 unfavorable
B) (200,000 units × $20) - (203,000 units × $20) = $60,000 U
Caan Corporation used the following data to evaluate their current operating system. The company sells
items for $20 each and used a budgeted selling price of $20 per unit.
Actual Budgeted
Units sold 200,000 units 203,000 units
Variable costs $1,250,000 $1,500,000
Fixed costs $ 925,000 $ 900,000
What is the static-budget variance of variable costs? A) $200,000 favorable B) $50,000 unfavorable C) $250,000 favorable D) $250,000 unfavorable
C) $1,250,000 - $1,500,000= $250,000 F
Caan Corporation used the following data to evaluate their current operating system. The company sells
items for $20 each and used a budgeted selling price of $20 per unit.
Actual Budgeted
Units sold 200,000 units 203,000 units
Variable costs $1,250,000 $1,500,000
Fixed costs $ 925,000 $ 900,000
What is the static-budget variance of operating income? A) $165,000 favorable B) $190,000 unfavorable C) $60,000 favorable D) $60,000 unfavorable
A) Actual Static Static-budget
Results Budget Variance
Units sold 200,000 203,000
Revenues $4,000,000 $4,060,000 $(60,000) U
Variable costs 1,250,000 1,500,000 (250,000) F
Contribution margin$2,750,000 $2,560,000 190,000 F
Fixed costs 925,000 900,000 25,000 U
Operating income $1,825,000 $1,660,000 $165,000 F
Everclean Filter Corporation used the following data to evaluate their current operating system. The
company sells items for $10 each and had used a budgeted selling price of $11 per unit.
Actual Budgeted
Units sold 306,000 units 300,000 units
Variable costs $965,000 $950,000
Fixed costs $ 53,000 $ 50,000
13) What is the static-budget variance of revenues?
A) $60,000 favorable
B) $30,000 unfavorable
C) $30,000 favorable
D) $6,000 favorable
C) (306,000 units × $10) - (300,000 units × $11) = $30,000 F
Everclean Filter Corporation used the following data to evaluate their current operating system. The
company sells items for $10 each and had used a budgeted selling price of $11 per unit.
Actual Budgeted
Units sold 306,000 units 300,000 units
Variable costs $965,000 $950,000
Fixed costs $ 53,000 $ 50,000
What is the static-budget variance of variable costs? A) $13,000 favorable B) $13,000 unfavorable C) $15,000 favorable D) $15,000 unfavorable
D) $965,000 - $950,000= $15,000 U
Everclean Filter Corporation used the following data to evaluate their current operating system. The
company sells items for $10 each and had used a budgeted selling price of $11 per unit.
Actual Budgeted
Units sold 306,000 units 300,000 units
Variable costs $965,000 $950,000
Fixed costs $ 53,000 $ 50,000
What is the static-budget variance of operating income? A) $12,000 unfavorable B) $12,000 favorable C) $15,000 favorable D) $15,000 unfavorable
$12,000 favorable
Regier Company had planned for operating income of $10 million in the master budget but actually
achieved operating income of only $7 million.
A) The static-budget variance for operating income is $3 million favorable.
B) The static-budget variance for operating income is $3 million unfavorable.
C) The flexible-budget variance for operating income is $3 million favorable.
D) The flexible-budget variance for operating income is $3 million unfavorable.
B) The static-budget variance for operating income is $3 million unfavorable.
The master budget is one type of flexible budget.
false
A flexible budget is calculated at the end of the budget period.
TRUE
Information regarding the causes of variances is provided when the master budget is compared with
actual results.
FALSE
A variance is the difference between the actual cost for the current and expected (or budgeted)
performance
TRUE
A favorable variance results when actual costs exceed budgeted costs
FALSE
Management by exception is the practice of concentrating on areas not operating as anticipated
(such as a cost overrun) and placing less attention on areas operating as anticipated.
TRUE
The essence of variance analysis is to capture a departure from what was expected.
TRUE
A favorable variance should be ignored by management.
FALSE