Question 1

The primary challenge in creating a flexible budget is:
A) determining how much expenses should increase or decrease with changes in output.
B) estimating future output.
C) identifying the expenditure base to use.
D) identifying an inflation factor for each object code.

Accepted Answer

The primary challenge in creating a flexible budget is determining how much expenses should increase or decrease with changes in output, as this requires understanding the relationship between costs and activity levels.

Question 2

A cost standard specifies the:
A) number of inputs used per output during the expenditure base.
B) cost of inputs consumed during the expenditure base.
C) cost of inputs expected during the budget year.
D) per-output profit expected during the budget year.

Accepted Answer

Cost standard specifies the cost of inputs consumed during the expenditure base.

Question 3

A budget standard specifies the:
A) number of inputs used per output during the expenditure base.
B) cost of inputs consumed during the expenditure base.
C) cost of inputs expected during the budget year.
D) per-output profit expected during the budget year.

Accepted Answer

A budget standard specifies the cost of inputs expected during the budget year, serving as a benchmark for financial planning and control.

Question 4

If 20,000 hours of labor were used in the expenditure base, $1,000,000 was paid in salary to produce 5,000 outputs, and wages are expected to increase by 5%, the productivity standard would be:
A) 4.0 hours per output.
B) $200 per output.
C) 4.2 hours per output.
D) $210 per output.

Accepted Answer

The productivity standard is calculated by dividing the total hours of labor by the number of outputs. 20,000 hours / 5,000 outputs = 4.0 hours per output.

Question 5

If 20,000 hours of labor were used in the expenditure base, $1,000,000 was paid in salary to produce 5,000 outputs, and wages are expected to increase by 5%, the cost standard would be:
A) 4.0 hours per output.
B) $200 per output.
C) 4.2 hours per output.
D) $210 per output.

Accepted Answer

The answer of If 20,000 hours of labor were used...

Question 6

If 20,000 hours of labor were used in the expenditure base, $1,000,000 was paid in salary to produce 5,000 outputs, and wages are expected to increase by 5%, the budget standard would be:
A) 4.0 hours per output.
B) $200 per output.
C) 4.2 hours per output.
D) $210 per output.

Accepted Answer

The answer of If 20,000 hours of labor were used...

Question 7

Assume the budget standard for staff salaries is $50.00 per output and the preliminary budget assumed 4,000 outputs would be produced. At the end of the year, 4,060 units were produced. The final, restated budget for staff salaries:
A) should remain the same as the preliminary budget.
B) should increase by $3,000.
C) should decrease by $3,000.
D) cannot be determined.

Accepted Answer

The preliminary budget was based on 4,000 outputs at $50 each, totaling $200,000. With 4,060 outputs, the budget should be adjusted to 4,060 x $50 = $203,000, an increase of $3,000.

Question 8

Assume the budget standard for management salaries is $360,000 per year and the preliminary budget assumed 4,000 outputs would be produced. At the end of the year, 4,060 units were produced. The final, restated budget for management salaries:
A) should remain the same as the preliminary budget.
B) should increase by $5,400.
C) should decrease by $5,400.
D) cannot be determined.

Accepted Answer

Management salaries are typically fixed costs and do not vary with the level of output. Therefore, the budget for management salaries should remain the same regardless of the increase in units produced.

Question 9

Which of the following actions can a manager take to maximize their budget in a flexible budgeting system when output is expected to increase?
A) Designate all costs as variable
B) Select the highest cost standard
C) Select the expenditure base that will supply the highest starting point for the budget
D) Select the highest inflation factors
E) All of these are correct.

Accepted Answer

The answer of Which of the following actions can a...

Question 10

Which of the following actions would reduce a budget in a flexible budgeting system when output is expected to decrease?
A) Designate all costs as fixed
B) Select the highest cost standard
C) Select the expenditure base that will supply the highest starting point for the budget
D) Select the highest inflation factors
E) All of these are correct.

Accepted Answer

The answer of Which of the following actions would reduce...

Question 11

Flexible budgets should not be used when output cannot be accurately predicted.

Accepted Answer

Flexible budgets are specifically designed to adjust for changes in output levels, making them suitable for situations where output cannot be accurately predicted.

Question 12

The goal of a flexible budgets is to ensure managers do not spend more than they are allocated in the preliminary budget.

Accepted Answer

A flexible budget adjusts for changes in activity levels, allowing managers to better manage resources and respond to actual conditions rather than strictly adhering to initial allocations.

Quiz 4: Incorporating Actual Output in to the Budget - Flexible Budgeting

The primary challenge in creating a flexible budget is:

A cost standard specifies the:

A budget standard specifies the:

If 20,000 hours of labor were used in the expenditure base, $1,000,000 was paid in salary to produce 5,000 outputs, and wages are expected to increase by 5%, the productivity standard would be:

If 20,000 hours of labor were used in the expenditure base, $1,000,000 was paid in salary to produce 5,000 outputs, and wages are expected to increase by 5%, the cost standard would be:

If 20,000 hours of labor were used in the expenditure base, $1,000,000 was paid in salary to produce 5,000 outputs, and wages are expected to increase by 5%, the budget standard would be:

Assume the budget standard for staff salaries is $50.00 per output and the preliminary budget assumed 4,000 outputs would be produced. At the end of the year, 4,060 units were produced. The final, restated budget for staff salaries:

Assume the budget standard for management salaries is $360,000 per year and the preliminary budget assumed 4,000 outputs would be produced. At the end of the year, 4,060 units were produced. The final, restated budget for management salaries:

Which of the following actions can a manager take to maximize their budget in a flexible budgeting system when output is expected to increase?

Which of the following actions would reduce a budget in a flexible budgeting system when output is expected to decrease?

Flexible budgets should not be used when output cannot be accurately predicted.

The goal of a flexible budgets is to ensure managers do not spend more than they are allocated in the preliminary budget.