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1. A flexible budget is "flexible" in the sense that a budget can be prepared for any level of activity, but
once a budget is set the budget figures are not changed if actual activity later proves to be different than
2. In a performance report, actual costs should be compared to budgeted costs at the original budgeted
3. The overhead spending variance and the overhead efficiency variance are useful only if variable overhead
really should be proportional to the activity measure that is being used in the flexible budget.
4. The variable overhead efficiency variance reflects how efficiently variable overhead resources were
5. A reason for keeping a constant denominator activity level is to maintain stability in the amount of
overhead cost that is applied to each unit of product manufactured over the period.
6. The fixed portion of the predetermined overhead rate is used for product costing purposes and has no
significance in terms of cost control.
7. When choosing an activity measure for a flexible budget, it is best to choose an activity that is measured
8. In a standard costing system, under-applied or over-applied fixed overhead is equal to the sum of the
fixed overhead budget variance and the fixed overhead volume variance.
9. If the standard hours allowed for the actual output of the period is greater than the denominator level of
activity (in hours), then the overhead budget variance will be unfavourable.
10. The fixed overhead budget variance is not controllable by managers since fixed costs are not
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