1) The difference between the actual cost incurred and the standard cost is called the:
Select one:
a. Flexible variance.b. Price variance.c. Cost variance.d. Controllable variance.e. Volume variance.
2). Which of the following is the correct interpretation of a degree of operating leverage of 5?
Select one: a. Operating leverage of 5 means that sales can decrease by 5% before the firm's current level of sales will hit the break-even point. b. Operating leverage of 5 means that if sales increase by 5% the firm will hit its break-even point. c. Operating leverage of 5 means that if sales increase by 5%, there will be a 25% increase in the firm's pretax profit. d. Operating leverage of 5 measures the degree of debt employed by the firm's debt structure. e. Operating leverage of 5 means that the company would need to increase sales by 5 times in order to hit its break-even point.
3). Identify the situation that will result in a favorable variance.
Select one: a. Actual revenue is higher than budgeted revenue. b. Actual revenue is lower than budgeted revenue. c. Actual income is lower than expected. d. Actual costs are higher than budgeted costs. e. Actual expenses are higher than budgeted expenses.