10.1 : A budget that is based on the actual activity level of a period is a flexible budget A flexible budget contains a plan for a range of activity levels so that the plan can be adjusted to reflect changes in activity levels Assuming that all activity is within the relevant range, and increase in the activity level in a flexible budget will increase total costs The static budget is developed at the beginning of the period The flexible budget used in an income statement performance report is based on the actual number of outputs The master budget is based on the expected number of outputs The flexible budget used in an income statement performance report is developed at the end of the period The difference between actual costs and the costs that should have been incurred for the actual number of outputs is the flexible budget variance 10.3.: Advantages of using standard costs include all of the following except: the price sensitivity of consumers can be analyzed A sales variance will occur when the number of unit actually sold differs from the volume originally planned for in the master budget 10.4: A favorable material quantity variance indicates that the actual quantity of material used is less than the standard material allowed for the actual quantity of output 10.5: The production volume variance is favorable whether actual output exceeds expected output The total manufacturing overhead variance is composed of flexible budget variance and production volume variance 11.1: Which is not one of the potential advantages of decentralization?: increases goal congruence The Quaker Foods division of PepsiCo is most likely treated as an investment center Decentralization is often based on all the following except revenue size Companies usually decentralized when they grow too large for one person to manage the entire organization’s daily operations Decentralization is often based on: business function, product line, geographical area, brand, customer base Some advantages of decentralization are: free top managements time, improves customer relations, increases employee motivation satisfaction, support the use of expert knowledge Disadvantages of decentralization: problems achieving goal congruence, duplication of costs or assets
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