Chapter 8

Question 1

When are Static Budgets and Flexible Budgets created?

Answer 1

Static Budgets created at the BEGINNING of the period

Flexible Budgets created at the END of the period

Question 2

What does the Static Budget use? What does the Flexible Budget use? (Quantity and Price)

Answer 2

Static Budget

• budgeted/expected Price
• budgeted/expected Quantity

Flexible Budget

• Actual Quantity
• budgeted/expected Price

Question 3

You must know the ___ to prepare the Flexible Budget

Answer 3

Cost Behavior

Question 4

Who investigates when there is a

DM Price Variance
DM Usage Variance
DL Rate Variance 
DL Efficiency Variance
Variable Manufacturing Overhead Variance

Answer 4

DM Price Variance
-Purchasing Department Manager

DM Usage Variance
-Production Department Manager

DL Rate Variance
-HR Department Manager

DL Efficiency Variance
-Production Department Manager

Variable Manufacturing Overhead Variance
-Various Managers

Question 5

What causes the two direct materials variances?

What causes the two direct labor variances?

Answer 5

DM material Variances
-differences in DM Rates and DM usage

DL Variances
-difference in DL Rates and DL efficiency