chapter 7 cost acc - CHAPTER 7 FLEXIBLE BUDGETS,...

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CHAPTER 7 FLEXIBLE BUDGETS, DIRECT-COST VARIANCES, AND MANAGEMENT CONTROL TRUE/FALSE 1. The master budget is one type of flexible budget. Answer : False Difficulty : 1 Objective : 1 Terms to Learn : flexible budget The master budget is a static budget. 2. A flexible budget is calculated at the start of the budget period. Answer : False Difficulty : 1 Objective : 1 Terms to Learn : flexible budget A flexible budget is calculated at the end of the budget period when actual output is known. 3. Information regarding the causes of variances is provided when the master budget is compared with actual results. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : variance Little information regarding the causes of variances is provided when the master budget is compared with actual results because you are comparing a budget for one level of activity with actual costs for a different level of activity. 4. A favorable variance results when budgeted revenues exceed actual revenues. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : favorable variance An unfavorable variance results when budgeted revenues exceed actual revenues. 5. Management by exception is the practice of concentrating on areas not operating as anticipated (such as a cost overrun) and placing less attention on areas operating as anticipated. Answer : True Difficulty : 1 Objective : 1 Terms to Learn : management by exception 6. The essence of variance analysis is to capture a departure from what was expected. Answer : True Difficulty : 1 Objective : 1 Terms to Learn : variance 7-1
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7. A favorable variance should be ignored by management. Answer : False Difficulty : 1 Objective : 1 Terms to Learn : favorable variance Favorable variance investigation may lead to improved production methods, other discoveries for future opportunities, or not be good news at all and adversely affect other variances. 8. An unfavorable variance may be due to poor planning rather than due to inefficiency. Answer : True Difficulty : 2 Objective : 1 Terms to Learn : unfavorable variance 9. The only difference between the static budget and flexible budget is that the static budget is prepared using planned output. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : static budget, flexible budget 10. The static-budget variance can be subdivided into the flexible-budget variance and the sales-volume variance. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : static-budget variance, sales-volume variance, flexible-budget variance 11. The flexible-budget variance may be the result of inaccurate forecasting of units sold. Answer : False Difficulty : 3 Objective : 2 Terms to Learn : flexible-budget variance The sales-volume variance is the result of inaccurate forecasting of units sold. 12.
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This note was uploaded on 05/18/2011 for the course ACC cost acc 2 taught by Professor D during the Spring '11 term at Academy of Art University.

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chapter 7 cost acc - CHAPTER 7 FLEXIBLE BUDGETS,...

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