CBS Performance Measurement & Variance Analysis

Question 1

What does a favorable budget variance indicate?

Accepted Answer

Actual results were better than budgeted expectations

Answer

A favorable variance means actual performance exceeded the budget plan, such as lower costs or higher revenues than projected.

Question 2

Which formula correctly calculates a spending (expenditure) variance?

Accepted Answer

Budgeted Cost – Actual Cost

Answer

A spending variance is computed as Budgeted Cost minus Actual Cost, so a positive result is favorable (spent less than budgeted).

Question 3

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

Accepted Answer

Adjusts cost allowances based on actual activity levels

Answer

A flexible budget recalculates budgeted figures at the actual level of activity, enabling meaningful variance analysis by separating volume effects from efficiency effects.

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

The sales volume variance isolates the impact of selling more or fewer units than planned, holding price constant at the budgeted rate.

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

Management by exception directs attention and resources to variances that are significant enough to warrant action, rather than investigating every minor deviation.

(CBS) Certified Budget Specialist Practice Test

(CBS) Certified Budget Specialist Practice Test

CBS Performance Measurement & Variance Analysis