ACNT 2402Chapter 08 - Study Guide Questions and Answers(2022/2023)

Chapter 8 – Flexible Budgets, Standard Costs, and Variance Analysis Study Guide 1. Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control. FALSE 2. Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled. FALSE 3. Fixed costs should be ignored when evaluating how well a manager has controlled costs. FALSE 4. Fixed costs should be included in a flexible budget even though they do not change when the level of activity changes. TRUE 5. When a flexible budget is used in performance evaluation, actual costs are compared to the static planning budget rather than to what the costs should have been for the actual level of activity during the period. FALSE 6. A flexible budget should not be used when making comparisons to actual results such as actual expenses. FALSE 7. A flexible budget cannot be used to estimate what costs should have been at a given level of activity. FALSE 8. A flexible budget can be used to estimate what revenues and costs should have been, given the actual level of activity for the period. TRUE 9. A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period. FALSE 10. A revenue variance is favorable if the actual revenue exceeds what the revenue should have been for the actual level of activity of the period. TRUE