Question: True or false: A static budget is being compared to actual activity. The variance is F for net income but U for most expenses. This suggests that actual activity was lower than budgeted.

Answer: FALSE

(true is wrong b/c it suggests the opposite where actual activity is higher than expected which results in higher net income and expenses)

Question: A revenue variance is the ______.

Answer: difference between what revenue should have been at the actual level of activity and the actual revenue.

Question: A flexible budget shows:

Answer: what revenue should have been at the actual level of activity; what fixed costs should have been at the actual level of activity; and what variable costs should have been at the actual level of activity

Question: When actual revenue ______ what the revenue should have been, the variance is labeled favorable.

Answer: exceeds

Question: Given planning budget revenue of $284,000, actual revenue of $275,000, and flexible budget revenue of $290,000, there is a(n) _______ activity variance.

Answer: favorable

Question: The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost is a(n) _______ variance.

Answer: spending

Question: Spending Variance

Answer: The difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost. If actual cost is greater than what the cost should have been; unfavorable. If actual cost is less than what the cost should have been; favorable.

Question: Revenue Variance

Answer: The difference between what the total revenue should have been, given the actual level of activity for the period, and the actual total revenue. If actual revenue exceeds what the revenue should have been; favorable. If actual revenue is less than what the revenue should have been; unfavorable.

Question: Planning Budget

Answer: Prepared before the period beings and is valid for only the planned level of activity. Inappropriate for evaluating how well costs are controlled.

Question: Flexible Budget

Answer: