Budgeting & Variance Analysis Flashcards
7 cards from real CPM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Budgeting & Variance Analysis flashcards as text
A manager responsible for both revenues and costs within a division is accountable for a:
Answer: Profit center
A profit center manager controls both revenues and costs, and is evaluated on the net profit or contribution margin generated by the unit.
Which of the following variances would be investigated first under management by exception?
Answer: A 15% unfavorable labor efficiency variance
Management by exception focuses attention on variances that are large relative to budget; a 15% unfavorable labor efficiency variance signals a significant problem worthy of immediate investigation.
A company's master budget was prepared assuming sales of 10,000 units. Actual sales were 9,200 units. To fairly evaluate variable cost performance, management should compare actual variable costs to:
Answer: The flexible budget adjusted for 9,200 units
Comparing actual costs to a flexible budget at 9,200 units removes the volume effect and shows whether cost efficiency targets were met at the actual activity level.
The overhead spending variance measures the difference between:
Answer: Actual overhead incurred and the budgeted overhead for the actual hours worked
The overhead spending variance = Actual overhead − Budgeted overhead for actual input hours, indicating whether overhead costs were controlled within expectations.
In preparing a cash budget, which item would NOT appear as a cash outflow?
Answer: Depreciation expense on existing assets
Depreciation is a non-cash charge that allocates the cost of an asset over time; it does not involve an actual cash payment and is therefore excluded from the cash budget.
A purchasing manager buys a cheaper grade of raw material to create a favorable price variance. The most likely consequence is a(n):
Answer: Unfavorable materials usage variance due to higher waste or rework
Lower-quality materials often lead to higher waste, defects, or rework, causing more material to be used than the standard quantity and resulting in an unfavorable usage variance.
Which budget is typically prepared first in the master budget process for a manufacturing company?
Answer: Sales budget
The sales budget is prepared first because all other budgets—production, materials, labor, overhead, and cash—depend on the projected volume of sales.