Chapter 9

Question 1

What is a static (planning) budget?

Answer 1

A budget that remains the same throughout a specific period

Question 2

What are the characteristics of a flexible budget?

Answer 2

1. May be prepared for any activity level in the relevant range
2. Show costs that should have been incurred at the actual level of activity
3. Help Managers control costs
4. Improve performance evaluation

Question 3

What is the equation for a flexible budget?

Answer 3

Flexible budget = fixed costs + (actual unit of activity * variable cost per unit of activity)

Question 4

What are the two types of standards?

Answer 4

Quantity standard and Price standard

Question 5

How are standard cost variance closed?

Answer 5

Closed to COGS at the end