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
Which of the following best describes an 'imposed' (top-down) budget?
Answer: Targets are set by senior management and communicated downward without subordinate input
An imposed budget is dictated by upper management, which sets targets without meaningful input from the managers who must meet them.
A favorable fixed overhead expenditure variance means that:
Answer: Actual fixed overhead was less than budgeted fixed overhead
A favorable fixed overhead expenditure variance arises when the actual fixed overhead costs incurred are lower than the amount budgeted for the period.
When actual revenue exceeds budgeted revenue for a given period, the result is a:
Answer: Favorable revenue variance
Earning more revenue than budgeted is a favorable outcome, meaning actual performance exceeded the plan on the revenue side.
The 'management by exception' principle in budgetary control means that managers should:
Answer: Focus analysis and corrective action on variances that exceed a predetermined materiality threshold
Management by exception directs managerial attention to significant deviations from plan—both favorable and unfavorable—so time and effort are spent where they matter most.
A company produced 5,000 units but budgeted for 6,000. Which of the following is the most direct result?
Answer: An unfavorable fixed overhead volume variance due to under-absorption
Producing fewer units than budgeted means fixed overhead is spread over fewer units, causing under-absorption and an unfavorable fixed overhead volume variance.
A manager wants to align the budget to strategic objectives and evaluate performance using both financial and non-financial measures. Which framework best supports this?
Answer: Balanced Scorecard-linked budgeting
Balanced Scorecard-linked budgeting connects financial targets to strategic objectives across multiple perspectives—financial, customer, internal processes, and learning & growth—integrating non-financial measures.
In a standard costing system, the materials mix variance arises when:
Answer: The actual combination of materials used differs from the standard mix proportion
The materials mix variance measures the cost impact of using a different proportion of material inputs than the standard mix specifies, holding total quantity constant.