Exam 2 - Chapter 23

Question 1

List:

Reasons Managers Use Budgets

Answer 1

1. To plan and control actions and the related revenues and expenses
2. To incorporate management’s strategic and operational plans
3. Compare actual results with budgeted amounts to determine corrective actions

Question 2

Examples:

Ways managers incorporate managements strategic and operational plans using budgets

Answer 2

1. Planning technology upgrades

2. Planning capital asset replacements, improvements or expansions

Question 3

List:

3 Types of Budgets of the Total Budget

Answer 3

1. Operating budget
2. Capital Expenditures budget
3. Financial Budget

Question 4

Define:

Operating Budget

Answer 4

Projects sales revenue, cost of goods sold, and operating expenses

Question 5

Define:

Capital Expenditures Budget

Answer 5

The plan for purchasing property, plan, equipment, and other long-term assets

Question 6

Define:

Financial Budget

Answer 6

Plans for raising cash and paying debts

Question 7

Answer:

Budgets contain ___(a)___ amounts, not ___(b)___ amounts

Answer 7

a. projected

b. actual

Question 8

Define:

Variance

Answer 8

Difference between budgeted (planned) and actual results

Question 9

Define:

Variance Analysis

Answer 9

Comparison of budgeted results with actual results

Question 10

Answer:

Variance should be investigated to determine ___(a)___ and ___(b)___

Answer 10

a. what caused the variance

b. what should be done to correct that variance

Question 11

Answer:

The first-level variance is the difference between ___(a)___ and ___(b)___

Answer 11

a. actual

b. the static (or master) budget

Question 12

List:

Favorable (F) Variances

Answer 12

1. Actual Revenue > Budgeted Revenue

2. Actual Expense < Budgeted Expense

Question 13

List:

Unfavorable (U) Variances

Answer 13

1. Actual Revenue < Budgeted Revenue

2. Actual Expense > Budgeted Expense

Question 14

Answer:

Static budget is also known as ___(a)___ budget

Answer 14

a. master

Question 15

Answer:

Static budget is prepared for only ___(a)___

Answer 15

a. one level of sales volume

Question 16

Answer:

The first-level variance is called ___(a)___

Answer 16

a. static budget variance

Question 17

Answer:

In second level variance the static budget variance (first-level variance) is partitioned into ___(a)___ and ___(b)___

Answer 17

a. flexible budget variance

b. sales volume variance

Question 18

Answer:

Flexible budget is based on ___(a)___ units sold, while static (master) budget is based on ___(b)___

Answer 18

a. actual

b. expected

Question 19

List:

Categories Managers Divide the Static Budget Variance Into

Answer 19

1. Flexible Budget Variance

2. Sales Volume Variance

Question 20

Answer:

Why does flexible budget variance occur?

Answer 20

because sales price per unit, variable cost per unit, and/or other fixed cost was different than planned

Question 21

Answer:

Why does sales volume variance occur?

Answer 21

Because actual number of units sold differs from the amount in the static budget

Question 22

Answer:

When we have flexible budget variance we have to look of if it is due to ___(a)___ or ___(b)___

Answer 22

a. input price (cost) variance

2. Quantity (efficiency) variance

Question 23

Define:

Input Price (cost) Variance

Answer 23

How well the business keeps until prices of material and labor inputs within standards/budget

Question 24

Answer:

Input price variance is ___(a)___ variance

Answer 24

a. cost

Question 25

Answer: Quantity variance variance is ___(a)___ variance

Answer 25

a. efficiency

Question 26

# Define: Quantity (efficiency) Variance

Answer 26

How well the business uses its materials or Human Resources

Question 27

Answer: The input price variance of direct materials may be calculated using the ___(a)___ rather than the ___(b)___

Answer 27

a. quantity purchased | b. quantity purchased

Question 28

# Define: Unfavorable input price variance of direct materials

Answer 28

positive due to AP > SP, so pay a higher price than budgeted price

Question 29

Answer: Unfavorable input price variance of materials could be due to ___(a)___ and/or ___(b)___, which is the ___(c)___ responsibility

Answer 29

a. general inflation of material prices b. unsuccessful negotiations with vendors c. purchase manager's

Question 30

List: Types of Direct Material Variances

Answer 30

1. Input Price Variance | 2. Quantity Variance

Question 31

# Define: Unfavorable Quantity Variance of Direct Materials

Answer 31

Positive due to AQ > SQ, so use more materials than budgeted

Question 32

List: Types of Direct Labor Variances

Answer 32

1. Quantity (Efficiency) Variance | 2. Input price (cost) Variance

Question 33

# Define: Unfavorable quantity (efficiency) variance of direct labor

Answer 33

Positive due to AQ > SQ, so use more labor hours than budgeted

Question 34

Answer: Quantity (efficiency) variance could be due to ___(a)___ which is the ___(b)___ responsibility

Answer 34

a. inefficient task allocation of employees | b. plant manager's

Question 35

# Define: Unfavorable input price variance of direct labor

Answer 35

Positive due to AP > SP, so pay higher labor wage than budgeted

Question 36

Answer: Unfavorable input price variance of labor could be due to ___(a)___ and/or ___(b)___, which is the ___(c)___ responsibility

Answer 36

a. general inflation of labor prices b. unsuccessful negotiations with potential employees c. human resource managers

Question 37

List: Types of Manufacturing (Variable) Overhead Variances (VOH)

Answer 37

1. Input price variance | 2. Quantity variance

Question 38

Answer: The cause of unfavorable input price variance of manufacturing (variable) overhead variances (VOH) is due to ___(a)___

Answer 38

a. higher variable overhead costs spent than budgeted

Question 39

# Define: Unfavorable input price variance of manufacturing (variable) overhead variances (VOH)

Answer 39

positive due to AQ > SQ, so used more materials or labor than budgeted

Question 40

Answer: Unfavorable input price variance of manufacturing (variable) overhead variances (VOH) could be due to ___(a)___, which is the ___(b)___ responsibility

Answer 40

a. production inefficiency | b. plant manager's

Question 41

Answer: With input price variance of manufacturing (variable) overhead variances (VOH), price is ___(a)___ and quantity is ___(b)___

Answer 41

a. overhead rate | b. overhead activity

Question 42

Answer: For any types of variables costs, flexible budget analysis includes ___(a)___ analysis and ___(b)___ analysis, however ___(c)___ analysis is different

Answer 42

a. input price variance b. quantity (efficience) variance c. fixed overhead variance

Question 43

Answer: There is no ___(a)___ for fixed overhead costs because fixed costs will not be affected by ___(b)___, so ___(c)___ is the same as ___(d)___

Answer 43

a. efficiency variance b. changes in volume c. fixed overhead flexible budget d. fixed overhead price variance

Question 44

# Define: Unfavorable Flexible Budget Variance

Answer 44

positive due to paying higher fixed overhead than budgeted

Question 45

Answer: Unfavorable flexible budget variance could be due to ___(a)___of the ___(b)___, such as ___(c)___

Answer 45

a. less efficient production planning b. plant mangers c. unnecessary and/or more expensive equipment