CBS Performance Measurement & Variance Analysis

Question 1

What does a favorable budget variance indicate?

Accepted Answer

Actual results were better than budgeted expectations

Answer

Actual costs exceeded budgeted costs

Answer

Actual revenue fell below budgeted revenue

Answer

The budget was not properly prepared

Question 2

Which formula correctly calculates a spending (expenditure) variance?

Accepted Answer

Budgeted Cost – Actual Cost

Answer

Actual Cost – Standard Cost for Actual Output

Answer

Actual Hours × Standard Rate – Standard Hours × Standard Rate

Answer

Standard Cost – Budgeted Cost

Question 3

A 'flexible budget' differs from a 'static budget' in that it:

Accepted Answer

Adjusts cost allowances based on actual activity levels

Answer

Is fixed for the entire fiscal year

Answer

Is prepared only after the period ends

Answer

Excludes variable costs from the analysis

Question 4

Which variance measures the difference between budgeted revenue and actual revenue due solely to the difference in units sold?

Accepted Answer

Sales volume variance

Answer

Price variance

Answer

Efficiency variance

Answer

Spending variance

Question 5

When analyzing variances, 'management by exception' means that managers should:

Accepted Answer

Focus investigative resources on variances that are material or exceed a threshold

Answer

Investigate every single budget variance regardless of size

Answer

Ignore all variances under 10% of budget

Answer

Report all variances to the board of directors

Question 6

Which of the following is a key performance indicator (KPI) used to measure budget execution efficiency in the public sector?

Accepted Answer

Budget utilization rate

Answer

Gross margin percentage

Answer

Price-to-earnings ratio

Answer

Debt-to-equity ratio

Question 7

An unfavorable labor efficiency variance results when:

Accepted Answer

Actual hours worked exceed the standard hours allowed for actual output

Answer

Workers are paid more per hour than the standard wage rate

Answer

The number of units produced exceeds the budget

Answer

Overhead costs are under-absorbed