Managerial Accounting
Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Chapter – 9
Flexible Budgets and Performance Analysis
,Chapter 09: flexible budgets and performance analysis
Chapter 09 Flexible Budgets and Performance Analysis
True / False Questions
1. Fixed costs should not be included in a performance report because fixed costs are not
controllable.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 09-01 Prepare a flexible budget
Level: Medium
2. A flexible budget can be used to determine what costs should have been at a given level of
activity.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-01 Prepare a flexible budget
Level: Easy
3. If activity is higher than expected, total variable costs should be higher than expected. If
activity is lower than expected, total variable costs should be lower than expected.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-01 Prepare a flexible budget
Level: Easy
1/230
,Chapter 09: flexible budgets and performance analysis
4. When a flexible budget is used in performance evaluation, actual costs are compared to
what the costs should have been for the actual level of activity during the period rather than to
the static planning budget.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-01 Prepare a flexible budget
Level: Easy
5. An activity variance is due solely to the difference between the level of activity assumed in
the planning budget and the actual level of activity used in the flexible budget.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-02 Prepare a report showing activity variances
Level: Easy
6. The activity variance for revenue is favorable if the actual level of activity for the period
exceeds the planned level of activity.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-02 Prepare a report showing activity variances
Level: Easy
7. The activity variance for revenue is unfavorable if the revenue in the flexible budget is less
than the revenue in the static planning budget.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-02 Prepare a report showing activity variances
Level: Easy
2/230
, Chapter 09: flexible budgets and performance analysis
8. The revenue and spending variances are the differences between the static planning budget
and the actual results for the period.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 09-03 Prepare a report showing revenue and spending variances
Level: Medium
9. A revenue variance is favorable if the revenue in the static planning budget exceeds the
revenue in the flexible budget.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 09-03 Prepare a report showing revenue and spending variances
Level: Medium
10. A spending variance is the difference between how much a cost should have been, given
the actual level of activity, and the actual amount of the cost for the period.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-03 Prepare a report showing revenue and spending variances
Level: Easy
11. A favorable spending variance occurs when the actual cost exceeds the amount of that
cost in the flexible budget.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 09-03 Prepare a report showing revenue and spending variances
Level: Medium
3/230
Ray H. Garrison, Eric W. Noreen, Peter C. Brewer
Chapter – 9
Flexible Budgets and Performance Analysis
,Chapter 09: flexible budgets and performance analysis
Chapter 09 Flexible Budgets and Performance Analysis
True / False Questions
1. Fixed costs should not be included in a performance report because fixed costs are not
controllable.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 09-01 Prepare a flexible budget
Level: Medium
2. A flexible budget can be used to determine what costs should have been at a given level of
activity.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-01 Prepare a flexible budget
Level: Easy
3. If activity is higher than expected, total variable costs should be higher than expected. If
activity is lower than expected, total variable costs should be lower than expected.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-01 Prepare a flexible budget
Level: Easy
1/230
,Chapter 09: flexible budgets and performance analysis
4. When a flexible budget is used in performance evaluation, actual costs are compared to
what the costs should have been for the actual level of activity during the period rather than to
the static planning budget.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-01 Prepare a flexible budget
Level: Easy
5. An activity variance is due solely to the difference between the level of activity assumed in
the planning budget and the actual level of activity used in the flexible budget.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-02 Prepare a report showing activity variances
Level: Easy
6. The activity variance for revenue is favorable if the actual level of activity for the period
exceeds the planned level of activity.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-02 Prepare a report showing activity variances
Level: Easy
7. The activity variance for revenue is unfavorable if the revenue in the flexible budget is less
than the revenue in the static planning budget.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-02 Prepare a report showing activity variances
Level: Easy
2/230
, Chapter 09: flexible budgets and performance analysis
8. The revenue and spending variances are the differences between the static planning budget
and the actual results for the period.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 09-03 Prepare a report showing revenue and spending variances
Level: Medium
9. A revenue variance is favorable if the revenue in the static planning budget exceeds the
revenue in the flexible budget.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 09-03 Prepare a report showing revenue and spending variances
Level: Medium
10. A spending variance is the difference between how much a cost should have been, given
the actual level of activity, and the actual amount of the cost for the period.
TRUE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Knowledge
Learning Objective: 09-03 Prepare a report showing revenue and spending variances
Level: Easy
11. A favorable spending variance occurs when the actual cost exceeds the amount of that
cost in the flexible budget.
FALSE
AACSB: Reflective Thinking
AICPA BB: Critical Thinking
AICPA FN: Measurement
Bloom's: Comprehension
Learning Objective: 09-03 Prepare a report showing revenue and spending variances
Level: Medium
3/230
