Question

practice: define the variance analysis cycles in context wi...

1. a/an ________ is unfavorable if the actual revenue is less than what the revenue should have been for the actual level of activity for the period.
2. when the activity measure is the ________, the revenue variance is unfavorable if the average actual selling price is less than expected.
3. a favorable ________ occurs when the actual cost is less than the amount of that cost in the flexible budget.
4. a/an ________ performance report should contain fixed as well as variable and mixed costs.
5. it may be easier to control ______ costs than ______ costs.
6. one of the biggest reasons that actual revenues and costs differ from budgeted revenues or costs is a change in the ________.
7. when a flexible budget is compared to the planning budget, ________ show how the cost should be changed in response to the difference between actual and planned activity.
8. if all costs are assumed to be fixed, variances for ______ and ______ costs will be incorrect.
9. if all costs are assumed to be variable, variances for ______ and ______ costs will be incorrect.
10. a management system in which actual results are compared to a budget is called management by ________
11. ____________ costs are incurred to identify defective products before they are shipped to customers.

Explanation:

1. Revenue variance compares actual revenue to flexible budget revenue; unfavorable when actual is lower.
2. Sales volume (activity measure) links to selling price impact on revenue variance.
3. Spending variance is between actual cost and flexible budget cost; favorable if actual is lower.
4. Flexible budget performance reports include fixed, variable, and mixed costs.
5. Variable costs (tied to activity) are easier to control than fixed costs (constant in short term).
6. Change in activity level is a key driver of budget vs. actual differences.
7. Activity variances reflect cost changes due to activity level differences between flexible and planning budgets.
8. Assuming all costs fixed misrepresents variable and mixed costs’ variances.
9. Assuming all costs variable misrepresents fixed and mixed costs’ variances.
10. Management by exception compares actual results to budget.
11. Appraisal costs detect defects pre-shipment.

Answer:

1. revenue variance
2. sales volume
3. spending variance
4. flexible budget
5. variable; fixed
6. activity level
7. activity variances
8. variable; mixed
9. fixed; mixed
10. exception
11. Appraisal