Chapter 09 Flexible Budgets and Performance Analysis MC – Flashcards

26. A major weakness of flexible budgets is that: A. they are valid for only a single level of activity. B. they ignore fixed costs. C. they compare actual costs at one level of activity to budgeted costs at a different level of activity. D. none of these is a major weakness of flexible budgets.

27. Comparing actual results to a budget based on the actual activity for the period is possible with the use of a: A. monthly budget. B. master budget. C. flexible budget. D. rolling budget.

28. A static planning budget is: A. a budget for a single level of activity. B. a budget that ignores inflation. C. used only for fixed costs. D. used when the mix of products does not change.

29. Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance? A. static planning budget and flexible budget B. static planning budget and actual results C. flexible budget and actual results D. master budget and static planning budget

30. Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month. When the actual level of activity is less than budgeted, which of the following would be true? A. Variable costs would show favorable variances. B. Variable costs would show unfavorable variances. C. Fixed costs would show favorable variances. D. Fixed costs would show unfavorable variances.

17. The purpose of a flexible budget is to: A. remove items from performance reports that are not controllable by managers. B. permit managers to reduce the number of unfavorable variances that are reported. C. update the static planning budget to reflect the actual level of activity of the period. D. reduce the amount of conflict between departments when the master budget is prepared.

18. A static budget: A. should be compared to actual costs to assess how well costs were controlled. B. should be compared to a flexible budget to assess how well costs were controlled. C. is valid for only one level of activity. D. represents the best way to set spending targets for managers.

19. Which of the following comparisons best isolates the impact of a change in activity on performance? A. static planning budget and flexible budget B. static planning budget and actual results C. flexible budget and actual results D. master budget and static planning budget

20. Which of the following would not appear on a flexible budget performance report as shown in the text? A. Variable costs. B. Mixed costs. C. A flexible budget adjusted to the actual level of activity. D. The previous year's actual costs.