Question Details

21. A flexible budget variance can be decomposed into efficiency variance and a price variance.

True False

22. The most important task in variance analysis is to understand why variances occur, and then to use that

knowledge to promote learning and continual improvement.

True False

23. A limitation of a static budget is that a favourable revenue variance based upon higher than planned

activity levels will usually result in unfavourable variable cost variances.

True False

24. The activity base selected to use in preparing a flexible budget should cause, or at least be highly

correlated with, changes in variable costs.

True False

25. The fixed overhead budget variance is measured by?

A. the difference between budgeted fixed overhead cost and actual fixed overhead cost.

B. the difference between actual fixed overhead cost and applied fixed overhead cost.

C. the difference between budgeted fixed overhead cost and applied fixed overhead cost.

D. the difference between budgeted fixed overhead cost and standard fixed overhead cost.

26. A weakness of flexible budgets is that?

A. they are geared only to a single level of activity.

B. they give subordinates too much flexibility.

C.

they force the manager to compare actual costs at one level of activity to budgeted costs at a different

level of activity.

D.

companies with a variety of products or services may have problems in selecting an appropriate

activity level as an overall measure.

27. Which of the following variances would be useful in calling attention to possible problems in the control

of spending on overhead items?

A. choice A.

B. choice B.

C. choice C.

D. choice D.

28. Which of the following variances would be useful in calling attention to possible problems in the control

of spending on overhead items?

A. choice A.

B. choice B.

C. choice C.

D. choice D.

29. The higher the denominator level of activity, then which of the following is true?

A. the higher the unit product cost.

B. the lower the unit product cost.

C. the less likely is the occurrence of a volume variance.

D. the more profitable operations likely will be.

30. A decrease in denominator level of activity will?

A. decrease the fixed portion of the predetermined overhead rate.

B. increase the fixed portion of the predetermined overhead rate.

C. decrease the variable portion of the predetermined overhead rate.

D. increase the variable portion of the predetermined overhead rate.