ECONOMICS

Detailed explanation-1: -Answer: FALSE Explanation: An unfavorable flexible-budget variance for variable costs may be the result of using more input quantities than were budgeted.

Detailed explanation-2: -Efficiency variance is the difference between the theoretical amount of inputs required to produce a unit of output and the actual number of inputs used to produce the unit of output.

Detailed explanation-3: -Static vs Flexible Budgets Static Budget-the budget is prepared for only one level of production volume. Also called a Master budget. Flexible Budget-a summarized budget that can easily be computed for several different production volume levels. Separates variable costs from fixed costs.

Detailed explanation-4: -The static budget is used as the basis from which actual results are compared. The resulting variance is called a static budget variance. Static budgets are commonly used as the basis for evaluating both sales performance and the ability of cost center managers to maintain control over their expenditures.

Detailed explanation-5: -Which of the following statements is TRUE about static and flexible budgets? Static budgets are prepared on planned output at the beginning of the period; whereas flexible budgets are prepared on actual output at the end of the period.