Question 1

The production-volume variance is a component of the sales-volume variance.

True

False

Question 2

Long-run planning and short-run planning are best performed in combination with each other.

True

False

Question 3

Managers can always view a favorable variable overhead spending variance as desirable.

True

False

Question 4

Direct material price variance is likely to be unfavorable if the purchasing manager switched to a lower-price supplier.

True

False

Question 5

Managers must not interpret variances in isolation of each other

True

False

Question 6

Traditional-based budgeting (output-based cost drivers) provides better decision-making information than budgeting based on activity-based costing.

True

False

Question 7

To reduce budgetary slack management may ________.

incorporate stretch or challenge targets

use external benchmark performance measures

award bonuses for achieving budgeted amounts

reduce projected cost targets by 10% across all areas

Question 8

The cash budget is a schedule of expected cash receipts and disbursements that ________.

requires an aging of accounts receivable and accounts payable

is a self-liquidating cycle

is prepared immediately after the sales forecast

predicts the effect on the cash position at given levels of operations