1. The production-volume variance is favourable when actual outputs do not exceed the denominator level.

   True

   False

2. The denominator level is the quantity of the allocation base used to allocate fixed overhead costs to a cost object in developing a budgeted fixed overhead rate.

   True

   False

3. The direct materials usage budget is not based on direct materials purchased.

   True

   False

4. Lyman Co. has a production schedule of 18,000 units and a budgeted sales volume of 20,000 units for the current year. In addition, 4,000 units are in beginning finished goods inventory. Therefore, 14,000 units are targeted for ending finished goods inventory.

   True

   False

5. The revenue budget and budgeted statement of income are not necessary to prepare the budgeted balance sheet and budgeted statement of cash flows.

   True

   False