Chapter 9 Flashcards Preview

Accounting > Chapter 9 > Flashcards

Flashcards in Chapter 9 Deck (10)
Loading flashcards...
1

6 steps of the variance analysis cycle

1. Prepare performance report
2. Analyze variances
3. Raise questions
4. Identify root causes
5. Take actions
6. Conduct next period's operations

2

These are prepared for a single, planned level of activity

Planning budgets

3

4 characteristics of flexible budgets

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, enabling "apples to apples" cost comparison
3. Help managers control costs
4. Improve performance evaluation

4

This arises solely due to the difference in the actual level of activity and the level of activity in the planning budget

An activity variance

5

Difference between actual revenue and flexible budget revenue

Revenue variance

6

Difference between actual cost and flexible budget cost

Spending variance

7

Revenue variance

Difference between actual revenue and flexible budget revenue

8

Spending variance

Difference between actual cost and flexible budget cost

9

Flexible budget performance report order

Revenue/cost formulas
Actual results
Revenue and spending variances
Flexible budget
Activity variances
Planning budget

10

The most common errors when preparing performance reports are to implicitly assume that

All costs are fixed or that all costs are variable