Flexible Budget

Managers use budgets for ____________ business activities.

• planning

• controlling

• planning and controlling

The master budget focuses on

• the controlling step

• the planning step

• budget risk

The master budget

• is a static budget

• is prepared for at least 2 levels of sales volume

• is flexible

A variance ___________ an actual amount and the budgeted amount

• can increase

• is the difference between

• can decrease

Variance is Favorable (F) if

• an actual amount decreases operating income

• the budget amount is equal to the operating income

• an actual amount increases operating income

Variance is Unfavorable (U) if

• an actual amount decreases operating income

• the budget amount is equal to the operating income

• an actual amount increases operating income

A flexible budget

• summarizes revenues and expenses for only one level of sales volume

• summarizes revenues and expenses for various levels of sales volume

• summarizes revenues and expenses for the income statement

Managers need to know why variance occurred

• to take corrective actions

• to pinpoint problems

• both

A static budget variance is the difference between

• actual results and the expected results in the flex budget

• master budget results and the expected results in the static budget

• actual results and the expected results in the master budget

Managers divide the static budget variance into

• Flexible budget variance and Sales volume variance

• Master budget variance and Sales volume variance

• Static budget variance and Sales volume variance