Question 1

The flexible budget variance is the difference between
A)the static budget and the flexible budget.
B)the flexible budget and actual results.
C)the actual quantity and budgeted quantity.
D)the actual price and the standard price.

Accepted Answer

The flexible budget variance is the difference between the flexible budget (which is based on actual activity levels) and actual results. This variance measures how well the organization's expenses adjusted to changes in activity instead of being fixed in a static budget. A is incorrect because the static budget is not used in calculating the flexible budget variance. C and D are incorrect because they refer to other types of variances that are not relevant to the flexible budget variance.

Question 2

Assume the static budget sales revenue is $69,000 and the flexible budget sales revenue is $70,000.If the actual sales price is $6 and the budgeted sales price is $6.50,what is the sales volume variance?
A)$1,000 favorable
B)$1,000 unfavorable
C)$6,000 favorable
D)$6,500 unfavorable

Accepted Answer

The sales volume variance is calculated as (Flexible Budget Sales Revenue - Static Budget Sales Revenue), which is $70,000 - $69,000 = $1,000 favorable.

Question 3

The flexible budget variance reflects
A)how efficiently the company operated in producing a given level of sales.
B)how effectively the company reached its strategic goals.
C)a different volume of products than that specified in the static budget.
D)only favorable variances.

Accepted Answer

The flexible budget variance measures the difference between actual results and what the results should have been for the actual level of activity, indicating how efficiently the company operated.

Question 4

Materiality can be measured in terms of
A)absolute dollars.
B)relative percentages.
C)both absolute dollars and relative percentages.
D)neither absolute dollars or relative percentages.

Accepted Answer

Materiality can be measured using both absolute dollars and relative percentages. Absolute dollars refer to the actual monetary value of a particular item, while relative percentages refer to the percentage of a certain threshold, such as net income or total assets. Both of these methods are important in determining the significance of a particular item in relation to the financial statements as a whole.

Question 5

The difference between the static budget sales revenue and the flexible budget sales revenue is referred to as the
A)flexible budget variance.
B)static budget variance.
C)sales price variance.
D)sales volume variance.

Accepted Answer

The difference between the static budget sales revenue and the flexible budget sales revenue is known as the sales volume variance, as it reflects the impact of the difference in the number of units sold.

Question 6

Which of the following is a factor that managers might use in deciding whether to investigate a variance?
A)Materiality
B)The existence of a trend
C)Whether combining several accounts with large offsetting variances results in a small variance
D)All of these answer choices are correct

Accepted Answer

Managers may use any or all of these factors in deciding whether to investigate a variance. Materiality helps determine the significance of the variance, the existence of a trend helps identify a potential problem, and combining several accounts with large offsetting variances may result in a small variance that is not worth investigating.

Question 7

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000
A)$28,000 favorable
B)$28,000 unfavorable
C)$6,000 unfavorable
D)$34,000 favorable

Accepted Answer

The answer of Kevin Jarvis is the controller of Bitterroot...

Question 8

The sales volume variance does not help managers understand
A)the effects of price changes on actual results.
B)operational efficiency on actual results.
C)either the effects of price changes on actual results or the operational efficiency on actual results.
D)the impact of greater actual sales over budgeted sales.

Accepted Answer

The sales volume variance only shows the difference between actual sales volume and budgeted sales volume. It does not differentiate between the effects of price changes or operational efficiency on actual results. Therefore, it cannot help managers understand either of these factors individually. Additionally, the variance does not provide insight into the impact of greater actual sales over budgeted sales.

Question 9

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000
A)$28,000 favorable
B)$28,000 unfavorable
C)$6,000 favorable
D)$34,000 unfavorable

Accepted Answer

The answer of Kevin Jarvis is the controller of Bitterroot...

Question 10

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000
A)$28,000 favorable
B)$28,000 unfavorable
C)$6,000 unfavorable
D)$30,000 favorable

Accepted Answer

The answer of Kevin Jarvis is the controller of Bitterroot...

Question 11

Flexible budgets are used as a tool for
A)control.
B)evaluation.
C)planning.
D)All of these answer choices are correct.

Accepted Answer

Flexible budgets can be used for all three purposes - control, evaluation, and planning. They allow for adjustments to be made as actual results come in, helping with control and evaluation, and can also be used for future planning by anticipating potential changes in the business environment.

Question 12

The sales volume variance reflects
A)how efficiently the company operated in producing a given level of sales.
B)how effectively the company reached its strategic goals.
C)a different volume of products than that specified in the static budget.
D)only favorable variances.

Accepted Answer

The sales volume variance compares the actual sales volume with the budgeted sales volume in the static budget. If the actual sales volume is different from the budgeted sales volume, then there will be a sales volume variance. This variance can be favorable or unfavorable, depending on whether the actual sales volume is higher or lower than the budgeted sales volume. The sales volume variance does not necessarily reflect efficiency or effectiveness in achieving strategic goals, as these are measured by other variances.

Question 13

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000
A)$14,000 favorable
B)$14,000 unfavorable
C)$16,000 favorable
D)$30,000 unfavorable

Accepted Answer

The answer of Kevin Jarvis is the controller of Bitterroot...

Question 14

The sales volume variance is the difference between
A)the static budget and the flexible budget.
B)the flexible budget and actual results.
C)the actual quantity and budgeted quantity.
D)the actual price and the standard price.

Accepted Answer

The answer of The sales volume variance is the difference...

Question 15

The sales volume variance is influenced most heavily by actions of the
A)budget committee.
B)operations personnel.
C)sales and marketing personnel.
D)executives of the company.

Accepted Answer

The sales volume variance is directly related to the actions of sales and marketing personnel who are responsible for generating sales and increasing revenue. Other departments such as operations and executives may play a role in supporting these efforts, but they do not have as direct of an impact on sales volume. Therefore, choice C is the most appropriate answer.

Question 16

Which of the following variances would not be investigated by a manager following the management by exception principle?
A)A 10% favorable variance in raw materials price
B)A 10% unfavorable variance in direct labor rates
C)A 10% unfavorable variance in payroll tax expense
D)An unfavorable variance that has increased by 5% in each of the last five months

Accepted Answer

The answer of Which of the following variances would not...

Question 17

All differences between the flexible budget and actual performance must result from
A)sales.
B)operations.
C)differences in quantities.
D)differences in costs.

Accepted Answer

The answer of All differences between the flexible budget and...

Question 18

The flexible budget variance is influenced most heavily by actions of the
A)budget committee.
B)operations personnel.
C)sales personnel.
D)executives of the company.

Accepted Answer

The flexible budget variance is the difference between the actual results and the flexible budget. This variance is caused by changes in activity levels that were not accounted for in the original budget, such as changes in sales volume, production levels, or other operational factors. Therefore, operations personnel, who are responsible for managing and executing the day-to-day activities of the business, have the greatest impact on the flexible budget variance. The budget committee and executives of the company are responsible for setting the overall budget targets, while sales personnel focus more on generating revenue and may indirectly influence the flexible budget variance through changes in sales volume.

Question 19

Kevin Jarvis is the controller of Bitterroot Industries.Kevin prepared the following budgeted income statement at various levels of sales.After careful review of the budgeted income statements,and after discussions with the sales and production managers,the CEO determines that the best alternative is to base the budget on a sales volume of 30,000
A)$5,600 favorable
B)$5,600 unfavorable
C)$30,400 favorable
D)$34,000 unfavorable

Accepted Answer

The answer of Kevin Jarvis is the controller of Bitterroot...

Question 20

Assume the actual sales volume is 69,000
A)$6,500 unfavorable
B)$6,500 favorable
C)$6,000 unfavorable
D)$6,000 favorable

Accepted Answer

The term "unfavorable" indicates that the actual sales volume is less than expected, leading to a negative variance. The $6,500 unfavorable choice suggests a discrepancy between expected and actual sales, resulting in a loss.

Quiz 6: Performance Evaluation: Variance Analysis

The flexible budget variance is the difference between

Assume the static budget sales revenue is $69,000 and the flexible budget sales revenue is $70,000.If the actual sales price is $6 and the budgeted sales price is $6.50,what is the sales volume variance?

The flexible budget variance reflects

Materiality can be measured in terms of

The difference between the static budget sales revenue and the flexible budget sales revenue is referred to as the

Which of the following is a factor that managers might use in deciding whether to investigate a variance?

The sales volume variance does not help managers understand

Flexible budgets are used as a tool for

The sales volume variance reflects

The sales volume variance is the difference between

The sales volume variance is influenced most heavily by actions of the

Which of the following variances would not be investigated by a manager following the management by exception principle?

All differences between the flexible budget and actual performance must result from

The flexible budget variance is influenced most heavily by actions of the

Assume the actual sales volume is 69,000