Chapter 9 - Flexible Budgets and Performance Analysis Flashcards
What are planning budgets used for?
A single planned level of activity
What are 2 advantages of planning budgets?
- Help managers control costs
2. Improve performance evaluation
What is the layout of the budgets?
Number of units (quantity) Revenues Expenses Total Expenses Net Operating Income
What is the layout of the 3 rows in the variance?
Actual Budget
Planned Budget
Variances
What does F stand for?
Favorable Variances
What does U stand for?
Unfavorable Variances
What is the layout of the 3 rows in the activity variance?
Flexible Budget
Planned Budget
Activity Variances
What is the formula to find the variance?
Actual budget - Planned budget
What is the formula to find the activity variance?
Flexible budget - Planned budget
What is the layout of the 3 rows in the revenue and spending variance?
Actual Budget
Flexible Budget
Revenue and Spending Variances
What is the layout of the 5 rows in the performance report?
Actual Budget Revenue and Spending Variances Flexible Budget Activity Variances Planned Budget
What is the formula to find the revenue and spending variance?
Actual budget - flexible budget
True or False:
Non-profit organization’s revenue may consist of both fixed and variable elements
True
What are performance reports often prepared for?
Cost centers
Does the planning budget use the expected quantity or the actual quantity?
The expected quantity
Does the flexible budget use the expected quantity or the actual quantity?
The actual quantity
What is the Actual budget also known as?
The Income Statement
What is the difference between the actual budget and the planned budget?
Variance
What is the difference between the actual budget and the flexible budget?
Revenue and Spending Variance
What is the difference between the flexible budget and the planned budget?
Activity Variance
List 4 characteristics of flexible budgets
- It may be prepared for any activity level in the relevant range
- It show the incurred costs at the actual activity level
- It help managers control costs
- It improves performance evaluation
What is a budget that is prepared at the beginning of the budgeting period that is valid only for the planned level of activity?
A planning budget
What is a report showing estimates of what revenues and costs should have been, given the actual level of activity for the period?
A flexible budget
