Question 1

Revenue variances are excluded from variance analysis because they are outside the control of the business.

Accepted Answer

Revenue variances are included in variance analysis as they help in understanding the differences between actual and budgeted sales, which is crucial for business planning and control, even though they might be influenced by external factors.

Question 2

Variances for costs including material and labour can be broken down into price and efficiency variances.

Accepted Answer

Price variance measures the difference between the actual price paid for inputs and the standard price, while efficiency variance measures the difference between the actual quantity of inputs used and the standard quantity expected for the output.

Question 3

The sales price variance is calculated using (actual price - standard price) multiplied by budgeted volume.

Accepted Answer

The sales price variance is calculated using (actual price - standard price) multiplied by actual volume.

Question 4

The revenue budget variance is determined by comparing total budgeted revenues to actual revenues.

Accepted Answer

The revenue budget variance is calculated by comparing the actual revenues a company earns to the revenues it expected or budgeted to earn within a specific period, highlighting any differences between these figures.

Question 5

The revenue budget variance cannot be caused by changes in sales mix as total sales is unaffected by sales mix.

Accepted Answer

The revenue budget variance can indeed be caused by changes in sales mix, even if total sales remain constant, because different products or services typically have different selling prices and profit margins. Changes in the proportion of these products or services sold can therefore affect total revenue and profitability.

Question 6

The profit variance includes variances due to volume, price and efficiency.

Accepted Answer

Profit variance can be broken down into volume variance (differences due to the amount sold), price variance (differences due to the selling price or cost price compared to what was expected), and efficiency variance (differences due to how efficiently resources are used).

Question 7

The sales price variance can be broken down into market size variance, market share variance and product mix variance.

Accepted Answer

Sales price variance is typically broken down into volume variance and price variance, not market size variance, market share variance, and product mix variance. These latter variances are related to sales volume and mix, not directly to sales price.

Question 8

The sales price variance is favourable when the actual selling price exceeds the standard price.

Accepted Answer

A favorable sales price variance occurs when the actual selling price of a product is higher than the standard or expected selling price, indicating that the company was able to sell its products at a higher price than anticipated.

Question 9

Revenue variance analysis can also be called "competiveness effectiveness".

Accepted Answer

Revenue variance analysis measures the difference between actual revenue and budgeted revenue, and can be used to assess the effectiveness of a company's pricing and sales strategies.

Question 10

The flexible budget is equal to budgeted revenue and costs multiplied by actual volume.

Accepted Answer

A flexible budget adjusts budgeted revenue and costs based on the actual volume of output, allowing for a more accurate comparison between budgeted and actual performance.

Question 11

The aggregation of favourable and unfavourable variances helps reveal operational problems.

Accepted Answer

The answer of The aggregation of favourable and unfavourable variances...

Question 12

The sales volume variance can be broken down into market size variance, market share variance and product volume variance.

Accepted Answer

The sales volume variance is typically broken down into market size variance and market share variance, not product volume variance.

Question 13

The best way to develop standards for revenue is to use historical sales data.

Accepted Answer

While historical sales data can be useful, the best way to develop standards for revenue involves a comprehensive approach that includes market analysis, forecasting, and considering current economic conditions, in addition to historical sales data.

Question 14

The use of standards assists managers to identify the source of variances.

Accepted Answer

Standards provide a benchmark or expected level of performance or cost, which helps managers compare actual results to what was expected, thereby identifying variances and their sources.

Question 15

The sales price variance reflects the difference between standard and actual selling prices.

Accepted Answer

The sales price variance measures the difference between the actual selling price of a product and its budgeted or standard selling price, indicating how the actual prices achieved compare to what was expected or planned.

Question 16

The static budget is equal to budgeted revenue and costs multiplied by budgeted volume.

Accepted Answer

A static budget is based on the level of output planned at the start of the period, and it does not change with the actual level of output or activity. It involves calculating budgeted revenues and costs based on a predetermined level of volume or activity, hence the statement is true.

Question 17

The sales price variance is caused by a difference in the volume of units sold.

Accepted Answer

The sales price variance is caused by a difference between the actual selling price and the budgeted selling price, not by the volume of units sold.

Question 18

The only variance for overhead is the production volume variance.

Accepted Answer

There are several types of variances for overhead, including spending, efficiency, and production volume variances.

Question 19

Revenue drivers include competition, market share and brand strength.

Accepted Answer

Revenue drivers are factors that have a significant impact on a company's revenue. Competition, market share, and brand strength are indeed among these factors, as they directly influence customer preferences, pricing power, and ultimately, sales.

Question 20

Total budgeted revenues can be calculated using standard sales prices multiplied by budgeted volume.

Accepted Answer

Total budgeted revenues are often calculated by multiplying the standard (or expected) sales prices by the budgeted volume of units expected to be sold, providing an estimate of the total income expected from sales during a budget period.

Quiz 9: Variance Analysis: Revenue and Cost