Question 1

A flexible budget is a budget based on the budgeted sales volume at the beginning of the period.

Accepted Answer

A flexible budget is a budget that adjusts or flexes based on variations in actual sales volume, rather than being based solely on a budgeted sales volume at the beginning of the period.

Question 2

The flexible budget variance is influenced most heavily by forces external to the operating process.

Accepted Answer

The flexible budget variance is actually influenced more by internal factors related to the operating process, such as changes in production volume or changes in cost behavior. External factors, such as changes in customer demand or market conditions, can still have an impact, but they are not as significant as internal factors in determining the flexible budget variance.

Question 3

An unfavorable variance is a variance that decreases operating income relative to the budgeted amount.

Accepted Answer

An unfavorable variance occurs when actual expenses are higher than budgeted expenses or actual revenues are lower than budgeted revenues, which results in decreased operating income relative to the budgeted amount.

Question 4

The flexible budget variance is the difference between the static budgeted amounts and the flexible budgeted amounts.

Accepted Answer

The flexible budget variance is the difference between the actual results and the flexible budget,

Question 5

The master budget is an example of a flexible budget.

Accepted Answer

The master budget is an example of a fixed budget, as it is prepared at the beginning of a period and outlines planned expenses and revenues for that period. A flexible budget, on the other hand, adjusts for changes in activity or volume levels.

Question 6

The direct materials price variance is calculated using the standard quantity of direct materials purchased,the actual price paid for the direct materials,and the standard price for the direct materials purchased.

Accepted Answer

The direct materials price variance is calculated using the actual quantity of direct materials purchased, the actual price paid for the direct materials, and the standard price for the direct materials purchased,

Question 7

A material variance is one that is large enough to make a difference in the outcome of a decision.

Accepted Answer

A material variance is one that is significant enough to impact a decision or outcome.

Question 8

All differences between the flexible budget and actual performance must result from operations,rather than from differences in sales volume.

Accepted Answer

The statement is true as the flexible budget adjusts for changes in sales volume and only accounts for differences in operations.

Question 9

The major factor in the amount of material used in production is the quality of the material.

Accepted Answer

The answer of The major factor in the amount of...

Question 10

A variance is labeled as "favorable" or "unfavorable" indicating their effect on managers' bonuses.

Accepted Answer

A variance is labeled as "favorable" or "unfavorable" based on its impact on the company's financial performance, not directly on managers' bonuses.

Question 11

The difference between actual sales volume and budgeted sales volume has nothing to do with the price and quantity variance.

Accepted Answer

The difference between actual sales volume and budgeted sales volume is a part of volume variance, which is separate from price and quantity variances. The volume variance is calculated by subtracting the budgeted sales volume from the actual sales volume. Price and quantity variances are calculated based on the difference between actual and budgeted prices and quantities.

Question 12

The direct materials quantity variance is the part of the direct materials flexible budget variance that is caused by using more or less material than the standard quantity allowed for actual production.

Accepted Answer

The direct materials quantity variance measures the difference between the actual quantity of materials used and the standard quantity allowed, while the direct materials flexible budget variance measures the overall difference between the actual cost of materials used and the budgeted cost for the materials. Therefore, the direct materials quantity variance is a component of the direct materials flexible budget variance.

Question 13

A variance is the difference between actual results and budgeted,or expected results.

Accepted Answer

A variance is defined as the difference between actual results and budgeted or expected results. Therefore, the statement is true.

Question 14

Because the production managers are the ones to negotiate the purchase price,they are typically held accountable for the direct materials price variance.

Accepted Answer

Because the purchasing agents are the ones to negotiate the purchase price, they are typically held accountable for the direct materials price variance,

Question 15

The sales volume variance is the difference between the flexible budget and the static budget.

Accepted Answer

The sales volume variance is the difference between the actual quantity of products sold and the budgeted quantity, also known as the flexible budget. It is then compared to the static budget, which is the budgeted quantity of products based on a fixed level of sales. Therefore, the statement is true.

Question 16

Management by exception focuses on all variances,regardless of size or importance.

Accepted Answer

Management by exception focuses only on significant variances that require action or attention, not all variances.

Question 17

A favorable variance is a variance that increases the flexible budget amount relative to the static budgeted amount.

Accepted Answer

A favorable variance occurs when actual results are better than expected, meaning costs are lower or revenues are higher than the budgeted amounts, not when the flexible budget amount increases relative to the static budget.

Question 18

The flexible budget variance reflects how efficiently the company operated in producing a given level of sales.

Accepted Answer

The flexible budget variance compares actual costs to what the costs should have been based on the actual level of sales achieved. It helps to identify if costs were managed effectively given the level of sales.

Question 19

Since a flexible budget is based on actual sales volume,it cannot be prepared until after the end of the period.

Accepted Answer

A flexible budget adjusts to actual sales volume, so it cannot be prepared until after the period ends and the actual sales are known.

Question 20

When the budget being used is a static budget,the difference between actual results and budgeted results is referred to as "budget slack".

Accepted Answer

Budget slack refers to the intentional overestimation of expenses or underestimation of revenues in a budget. The difference between actual results and budgeted results is called a "variance."

Quiz 6: Performance Evaluation: Variance Analysis