Ch 7

Question 0

Static budget variance

Answer 0

Difference btw actual result and corresponding

Budgeted amount in static budget

Question 1

Static budget AKA Master budget, what is it based on?

Answer 1

Static budget is based on the level of output planned

At the start of the budget period

Question 2

flexible budget?

Answer 2

Calculates budgeted revenues and budgeted costs based on actual output level of the Budget period

Question 3

Why is it useful to develop a flexible budget?

Answer 3

Flexible budgets help managers gain more insight into

the causes of variances than is available from static budget

Question 4

Variance

Answer 4

Difference btw actual results and expected performance

Question 5

Budgeted performance

Answer 5

Expected performance

Different point of reference for making comparisons

Question 6

Management by exception

Answer 6

Focusing management attention on areas that are not
Operating as expected

And devoting less time to areas operating as expected

Question 7

Favorable variance F

Answer 7

Has effect when considered in isolation Of

increasing operating income relative to budgeted amount

Question 8

Unfavorable variance

Answer 8

Has effect when considered in isolation Of

decreasing operating income relative to budgeted amount

Question 9

Static budget variance equation

Answer 9

Static budget variance for operating income =

Actual result) - (static budget amount

Question 10

3 steps of developing flexible budget

Answer 10

Step 1 Identify actual quantity of output

Step 2 calculate flexible budget revenues

Step 3 calculate flexible budget for costs

Question 11

Sales volume variance

Answer 11

Difference btw flexible budget amount and

corresponding static budget amount

Question 12

Flexible budget variance

Answer 12

Difference between actual result and corresponding

Flexible budget amount

Question 13

Sales volume variance for operating income equation?

Answer 13

Sales volume variance for operating income =

flexible budget amount) - (static budget amount

Question 14

Flexible budget variance equation?

Answer 14

Flexible budget variance =

Actual result) - (flexible budget amount

Question 15

Selling price variance equation?

Answer 15

Selling price variance =

(actual selling price - budgeted selling price) X actual units sold

Question 16

2 subdivisions of flexible budget variance for direct cost inputs?

Answer 16

1 price variance that reflects difference between actual
input price and budgeted input price

2 efficiency variance that reflects difference between
actual input quantity and budgeted input quantity

Question 17

Standard

Answer 17

Carefully determined price, cost or quantity used as

Benchmark for judging performance

Question 18

Standard input, 2 examples?

Answer 18

Carefully determined quantity of input

Ex square yards of cloth or direct manufacturing labor hours

Question 19

Standard price

Answer 19

Carefully determined price a company expects to

Pay for a unit of input

Question 20

Standard cost

Answer 20

Carefully determined cost of unit of output

Question 21

Standard cost per output unit for each variable direct cost input equation?

Answer 21

Standard cost per output unit for
Each variable direct cost input. =

(Standard input allowed for one output unit)
X (standard price price per input unit)

Question 22

Price variance AKA Input price variance AKA Rate variance, equation

Answer 22

Price variance =
(actual price of input - budgeted price of input) X actual quantity
Of input

Question 23

Efficiency variance equation?

Answer 23

Efficiency variance =
(actual quantity input used - budgeted quantity of input allowed)
For actual output
X budgeted price of input

Question 24

5 Possible operational causes of variance across value chain?

Answer 24

1 poor design of products or processes 2 poor work on production line because underskilled Workers/ faulty machines 3 inappropriate assignment of labor or machines to Specific jobs 4 congestion due to scheduling large # orders From sales representatives 5 suppliers not manufacturing uniformly high quality Material

Question 25

Performance measurement using variance: effectiveness

Answer 25

degree to which Predetermined objective or target is met

Question 26

Performance measurement using variance: efficiency

Answer 26

Relative amount of inputs used to achieve given output | Level

Question 27

Goal of variance analysis

Answer 27

For managers to understand why variances arise, | To learn and improve future performance

Question 28

Benchmarking

Answer 28

Continuos process of comparing levels of performance in producing products, services, activities against best levels Of performance in competing companies w similar processes

Question 29

What is the purpose of a standard cost?

Answer 29

The purposes of standard costs are to exclude past Inefficiencies and take into account changes Expected to occur in budget period

Question 30

How do managers use variances, 6 ways, in isolation?

Answer 30

For control, decision implementation, performance Evaluation, organization learning and continuous improvement Use multiple variances at same time

Question 31

Market share variance equation?

Answer 31

Market share variance = (actual market size in units) X (actual market share - budgeted market share) X (budgeted contribution margin per unit)

Question 32

Market size variance equation

Answer 32

Market size variance = (actual market size - budgeted market size) X (budgeted market share) X (budgeted contribution margin per unit)

Question 33

Developing flexible budget step 2: calculate flexible budget revenues based on...

Answer 33

budgeted selling price and actual quantity of output

Question 34

Developing flexible budget step 3: calculate flexible budget for costs based on ...

Answer 34

budgeted variable cost per output unit, | Actual quantity of output and budgeted fixed costs