Exam 2 - Chapter 23 Flashcards
List:
Reasons Managers Use Budgets
- To plan and control actions and the related revenues and expenses
- To incorporate management’s strategic and operational plans
- Compare actual results with budgeted amounts to determine corrective actions
Examples:
Ways managers incorporate managements strategic and operational plans using budgets
- Planning technology upgrades
2. Planning capital asset replacements, improvements or expansions
List:
3 Types of Budgets of the Total Budget
- Operating budget
- Capital Expenditures budget
- Financial Budget
Define:
Operating Budget
Projects sales revenue, cost of goods sold, and operating expenses
Define:
Capital Expenditures Budget
The plan for purchasing property, plan, equipment, and other long-term assets
Define:
Financial Budget
Plans for raising cash and paying debts
Answer:
Budgets contain ___(a)___ amounts, not ___(b)___ amounts
a. projected
b. actual
Define:
Variance
Difference between budgeted (planned) and actual results
Define:
Variance Analysis
Comparison of budgeted results with actual results
Answer:
Variance should be investigated to determine ___(a)___ and ___(b)___
a. what caused the variance
b. what should be done to correct that variance
Answer:
The first-level variance is the difference between ___(a)___ and ___(b)___
a. actual
b. the static (or master) budget
List:
Favorable (F) Variances
- Actual Revenue > Budgeted Revenue
2. Actual Expense < Budgeted Expense
List:
Unfavorable (U) Variances
- Actual Revenue < Budgeted Revenue
2. Actual Expense > Budgeted Expense
Answer:
Static budget is also known as ___(a)___ budget
a. master
Answer:
Static budget is prepared for only ___(a)___
a. one level of sales volume
Answer:
The first-level variance is called ___(a)___
a. static budget variance
Answer:
In second level variance the static budget variance (first-level variance) is partitioned into ___(a)___ and ___(b)___
a. flexible budget variance
b. sales volume variance
Answer:
Flexible budget is based on ___(a)___ units sold, while static (master) budget is based on ___(b)___
a. actual
b. expected
List:
Categories Managers Divide the Static Budget Variance Into
- Flexible Budget Variance
2. Sales Volume Variance
Answer:
Why does flexible budget variance occur?
because sales price per unit, variable cost per unit, and/or other fixed cost was different than planned
Answer:
Why does sales volume variance occur?
Because actual number of units sold differs from the amount in the static budget
Answer:
When we have flexible budget variance we have to look of if it is due to ___(a)___ or ___(b)___
a. input price (cost) variance
2. Quantity (efficiency) variance
Define:
Input Price (cost) Variance
How well the business keeps until prices of material and labor inputs within standards/budget
Answer:
Input price variance is ___(a)___ variance
a. cost
Answer:
Quantity variance variance is ___(a)___ variance
a. efficiency
Define:
Quantity (efficiency) Variance
How well the business uses its materials or Human Resources
Answer:
The input price variance of direct materials may be calculated using the ___(a)___ rather than the ___(b)___
a. quantity purchased
b. quantity purchased
Define:
Unfavorable input price variance of direct materials
positive due to AP > SP, so pay a higher price than budgeted price
Answer:
Unfavorable input price variance of materials could be due to ___(a)___ and/or ___(b)___, which is the ___(c)___ responsibility
a. general inflation of material prices
b. unsuccessful negotiations with vendors
c. purchase manager’s
List:
Types of Direct Material Variances
- Input Price Variance
2. Quantity Variance
Define:
Unfavorable Quantity Variance of Direct Materials
Positive due to AQ > SQ, so use more materials than budgeted
List:
Types of Direct Labor Variances
- Quantity (Efficiency) Variance
2. Input price (cost) Variance
Define:
Unfavorable quantity (efficiency) variance of direct labor
Positive due to AQ > SQ, so use more labor hours than budgeted
Answer:
Quantity (efficiency) variance could be due to ___(a)___ which is the ___(b)___ responsibility
a. inefficient task allocation of employees
b. plant manager’s
Define:
Unfavorable input price variance of direct labor
Positive due to AP > SP, so pay higher labor wage than budgeted
Answer:
Unfavorable input price variance of labor could be due to ___(a)___ and/or ___(b)___, which is the ___(c)___ responsibility
a. general inflation of labor prices
b. unsuccessful negotiations with potential employees
c. human resource managers
List:
Types of Manufacturing (Variable) Overhead Variances (VOH)
- Input price variance
2. Quantity variance
Answer:
The cause of unfavorable input price variance of manufacturing (variable) overhead variances (VOH) is due to ___(a)___
a. higher variable overhead costs spent than budgeted
Define:
Unfavorable input price variance of manufacturing (variable) overhead variances (VOH)
positive due to AQ > SQ, so used more materials or labor than budgeted
Answer:
Unfavorable input price variance of manufacturing (variable) overhead variances (VOH) could be due to ___(a)___, which is the ___(b)___ responsibility
a. production inefficiency
b. plant manager’s
Answer:
With input price variance of manufacturing (variable) overhead variances (VOH), price is ___(a)___ and quantity is ___(b)___
a. overhead rate
b. overhead activity
Answer:
For any types of variables costs, flexible budget analysis includes ___(a)___ analysis and ___(b)___ analysis, however ___(c)___ analysis is different
a. input price variance
b. quantity (efficience) variance
c. fixed overhead variance
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)___
a. efficiency variance
b. changes in volume
c. fixed overhead flexible budget
d. fixed overhead price variance
Define:
Unfavorable Flexible Budget Variance
positive due to paying higher fixed overhead than budgeted
Answer:
Unfavorable flexible budget variance could be due to ___(a)___of the ___(b)___, such as ___(c)___
a. less efficient production planning
b. plant mangers
c. unnecessary and/or more expensive equipment
