1 A planning budget is prepared before the period begins and is valid for whatever the actual level of activity turns out to be. True False

2 Fixed costs should be ignored when evaluating how well a manager has controlled costs. True False

3 A flexible budget should not be used when making comparisons to actual results such as actual expenses. True False

4 An activity variance is due to the difference between the level of activity used in the flexible budget and the actual level of activity. True False

5 An unfavorable activity variance for a variable cost occurs because the actual level of activity is higher than expected when the static planning budget was prepared. True False

6 A static planning budget is suitable for planning but is inappropriate for evaluating how well costs are controlled. True False

7 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? Variable costs would show favorable variances. Variable costs would show unfavorable variances. Fixed costs would show favorable variances. Fixed costs would show unfavorable variances.

8 A key Hospital bases its budgets on patient-visits. The hospital's static budget for March appears below: The total overhead cost at an activity level of 3,000 patient-visits per month should be: $97,800

$92,100

$88,020

$92,640

9 Borunda Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $37,020 per month plus $2,731 per flight plus $6 per passenger. The company expected its activity in July to be 73 flights and 253 passengers, but the actual activity was 75 flights and 251 passengers. The actual cost for plane operating costs in July was $231,770. The activity variance for plane operating costs in July would be closest to:

$6,131 F

$5,450 F

$6,131 U

$5,450 U