Question Details

1. A flexible budget is "flexible" in the sense that a budget can be prepared for any level of activity, but

once a budget is set the budget figures are not changed if actual activity later proves to be different than

budgeted activity.

True False

2. In a performance report, actual costs should be compared to budgeted costs at the original budgeted

activity level.

True False

3. The overhead spending variance and the overhead efficiency variance are useful only if variable overhead

really should be proportional to the activity measure that is being used in the flexible budget.

True False

4. The variable overhead efficiency variance reflects how efficiently variable overhead resources were

used.

True False

5. A reason for keeping a constant denominator activity level is to maintain stability in the amount of

overhead cost that is applied to each unit of product manufactured over the period.

True False

6. The fixed portion of the predetermined overhead rate is used for product costing purposes and has no

significance in terms of cost control.

True False

7. When choosing an activity measure for a flexible budget, it is best to choose an activity that is measured

in dollars.

True False

8. In a standard costing system, under-applied or over-applied fixed overhead is equal to the sum of the

fixed overhead budget variance and the fixed overhead volume variance.

True False

9. If the standard hours allowed for the actual output of the period is greater than the denominator level of

activity (in hours), then the overhead budget variance will be unfavourable.

True False

10. The fixed overhead budget variance is not controllable by managers since fixed costs are not

controllable.

True False