Question 1

A fixed budget performance report never provides useful information for evaluating variances.

Accepted Answer

A fixed budget performance report compares actual results to a predetermined fixed budget, making it useful for identifying variances and evaluating performance.

Question 2

Standard costs are preset costs for delivering a product or service under normal conditions.

Accepted Answer

Standard costs are predetermined costs that are set based on a company's experience and expected conditions, including normal productivity levels and normal levels of material usage required to deliver a product or service. These costs are then used as a benchmark for comparison with actual costs incurred during production.

Question 3

A flexible budget is based on a single predicted amount of sales or other activity measure.

Accepted Answer

A flexible budget is based on multiple levels of predicted activity measures, allowing for variations in performance and providing more accurate budgeting information.

Question 4

Variable budget is another name for a flexible budget.

Accepted Answer

Variable budget and flexible budget are interchangeable terms used to describe a budget that adjusts to changes in levels of activity or revenue.

Question 5

A cost variance equals the difference between the quantity variance and the price variance.

Accepted Answer

The cost variance is the difference between the actual cost and the standard cost. The quantity variance is the difference between the actual quantity and the standard quantity. The price variance is the difference between the actual price and the standard price. Therefore, the cost variance equals the difference between the quantity variance and the price variance.

Question 6

Cost variances are ignored under management by exception.

Accepted Answer

Cost variances are a key indicator of potential problems or opportunities and are closely monitored under management by exception. This technique involves focusing on significant deviations from expected results and only intervening when necessary to address the issue or take advantage of the opportunity.

Question 7

A cost variance is the difference between actual cost and standard cost.

Accepted Answer

A cost variance is calculated by subtracting the actual cost from the standard cost. If the resulting number is positive, it indicates that the actual cost was higher than the standard cost, whereas if the number is negative, it indicates that the actual cost was lower than the standard cost.

Question 8

While companies strive to achieve ideal standards,reality implies that some loss of materials usually occurs with any process.

Accepted Answer

It is true that some loss of materials usually occurs with any process, despite companies striving to achieve ideal standards.

Question 9

A variable or flexible budget is so named because it only focuses on variable costs.

Accepted Answer

The answer of A variable or flexible budget is so...

Question 10

Within the same flexible budget performance report,it is impossible to have both favorable and unfavorable variances.

Accepted Answer

It is possible to have both favorable and unfavorable variances within the same flexible budget performance report. A favorable variance occurs when actual results exceed budgeted expectations, while an unfavorable variance occurs when actual results fall short of budgeted expectations. Therefore, it is possible to have some cost items with favorable variances and others with unfavorable variances within the same report.

Question 11

Management by exception means that managers focus on the most significant differences between actual costs and standard costs.

Accepted Answer

Management by exception is a technique that focuses on significant variations from the norm, rather than minor ones. Therefore, managers only address issues or problems that require their attention and ignore routine operations that do not deviate from the norm. This technique is applied to financial and operational management aspects, and it helps to increase efficiency, saving resources, and promote growth within the organization.

Question 12

When standard costs are used,factory overhead is assigned to products with a predetermined standard overhead rate.

Accepted Answer

When standard costs are used, a predetermined standard overhead rate is established to assign factory overhead to products.

Question 13

Standard material costs,standard labor costs,and standard overhead costs can be obtained from standard cost tables published by the Institute of Management Accountants.

Accepted Answer

The answer of Standard material costs,standard labor costs,and standard overhead...

Question 14

Fixed budget performance reports compare actual results with the results expected under a fixed budget.

Accepted Answer

Fixed budget performance reports are specifically designed to compare actual results with the expected results in a fixed budget. Therefore, the statement is true.

Question 15

Another name for a static budget is a variable budget.

Accepted Answer

A static budget is a budget where the amount allotted for each expense category remains the same regardless of the actual revenue or expenses. On the other hand, a variable budget adjusts the amount allotted for each expense category based on the actual revenue or expenses. Therefore, a static budget and a variable budget are two different types of budgets and cannot be used interchangeably.

Question 16

Fixed budgets are also known as flexible budgets.

Accepted Answer

Fixed budgets are not the same as flexible budgets. Fixed budgets have predetermined amounts for income and expenses, while flexible budgets adjust according to changes in income or expenses.

Question 17

Companies promoting continuous improvement strive to achieve practical standards rather than ideal standards.

Accepted Answer

The answer of Companies promoting continuous improvement strive to achieve...

Question 18

A budget performance report shows budgeted amounts,actual amounts,and differences between budgeted and actual amounts.

Accepted Answer

This statement is true. A budget performance report provides a comparison of the budgeted amounts to the actual amounts spent or received, as well as highlighting any variations or differences between the two.

Question 19

Standard costs can be used by management to assess the reasonableness of actual costs incurred.

Accepted Answer

Standard costs provide a benchmark against which actual costs can be measured and analyzed. Any significant variances can then be investigated and corrective actions can be taken.

Question 20

When computing a price variance,the price is held constant.

Accepted Answer

The answer of When computing a price variance,the price is...

Quiz 23: Flexible Budgets and Standard Costs