1. Some financial variances show increases in operating income relative to a budgeted or allocated amount, and others show decreases in operating income. Respectively, these variances are*

A) budgeted, standard.

B) favourable, unfavourable.

C) standard, budgeted.

D) unfavourable, favourable.

E) fixed, variable.

2. Variances can be expected to vary within some normal limits, so not all variances require further investigation.*

True

False

3. An unfavourable variance is conclusive evidence of poor performance.*

True

False

4. The flexible budget contains*

A) budgeted amounts for alternative levels of output.

B) actual amounts for budgeted output.

C) revenue based on budgeted quantity and actual unit price.

D) actual costs for planned output.

E) the difference between flexible and static budget fixed costs.

16. A favourable variance can be automatically interpreted as "good news."*

True

False

17. The most important task in variance analysis is to understand why variances occur, and then to use that knowledge to promote learning and continual improvement.*

True

False

18. Which of the following is likely to be related to an unfavourable direct materials rate variance?

A) Standard costs were determined correctly.

B) the negotiating skills of the marketing manager

C) unexpected price decreases in direct materials

D) Actual direct material purchases were in larger quantities than normal, resulting in receiving volume discounts.

E) Materials were purchased based on a competitive bid.

9. Which of the following statements is TRUE?

A) A favourable variance always benefits a company.

B) Managers attempt to maintain unfavourable variances.

C) Favourable variances are typically not preferred by management.

D) Only a flexible budget can be used to determine a variance.

E) A favourable variance is not always beneficial for an organization.

20. ________ is a carefully predetermined amount usually expressed on a per-unit bas

A) Variable marketing overhead

B) A flexible budget

C) A standard

D) Fixed factory overhead

E) A static budget