TRUE OR FALSE

1 To help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity.

2. Using a flexible budget, actual results can be compared to what costs should have been at the actual level of activity.

3. Differences between the static planning budget and the flexible budget show what should have happened because the actual level of activity differed from what had been planned.

4. If activity is higher than expected, total fixed costs should be higher than expected. If activity is lower than expected, total fixed costs should be lower than expected.

5. Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes.

6. If demand is insufficient to keep everyone busy and workers are not laid off, an unfavorable (U) variable overhead efficiency variance often will be a result unless managers build excessive inventories.

7. The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the fixed part of the predetermined overhead rate.

8. When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost.

9. When more hours of labor time are necessary to complete a job than the standard allows, the labor efficiency variance is unfavorable.

10. The materials price variance is computed based on the amount of materials purchased during the period.