Deck 11: Flexible Budgets and Performance Analysis

Question 1

A revenue variance is favorable if the revenue in the static planning budget exceeds the revenue in the flexible budget.

Answer 1

False

Question 2

The activity variance for revenue is unfavorable if the revenue in the flexible budget is less than the revenue in the static planning budget.

Answer 2

True

Question 3

Directly comparing static budget costs to actual costs only makes sense if the costs are fixed.

Answer 3

True

Question 4

A static budget:

A)should be compared to actual costs to assess how well costs were controlled.
B)should be compared to a flexible budget to assess how well costs were controlled.
C)is valid for only one level of activity.
D)represents the best way to set spending targets for managers.

Question 5

When a flexible budget is used in performance evaluation, actual costs are compared to what the costs should have been for the actual level of activity during the period rather than to the static planning budget.

Question 6

While fixed costs should not be affected by a change in the level of activity within the relevant range, they may change for other reasons.

Question 7

If the actual level of activity is 4% more than planned, then the variable costs in the static budget should be increased by 4% before comparing them to actual costs.

Question 8

The activity variance for revenue is favorable if the actual level of activity for the period exceeds the planned level of activity.

Question 9

A flexible budget can be used to determine what costs should have been at a given level of activity.

Question 10

A favorable spending variance occurs when the actual cost exceeds the amount of that cost in the flexible budget.

Question 11

Flexible budgets cannot be used when there is more than one cost driver (i.e., measure of activity).

Question 12

If activity is higher than expected, total variable costs should be higher than expected. If activity is lower than expected, total variable costs should be lower than expected.

Question 13

An activity variance is due solely to the difference between the level of activity assumed in the planning budget and the actual level of activity used in the flexible budget.

Question 14

A flexible budget performance report contains both activity variances and revenue and spending variances.

Question 15

Which of the following would not appear on a flexible budget performance report as shown in the text?

A)Variable costs.
B)Mixed costs.
C)A flexible budget adjusted to the actual level of activity.
D)The previous year's actual costs.

Question 16

Which of the following comparisons best isolates the impact of a change in activity on performance?

A)static planning budget and flexible budget
B)static planning budget and actual results
C)flexible budget and actual results
D)master budget and static planning budget

Question 17

Fixed costs should not be included in a performance report because fixed costs are not controllable.

Question 18

The purpose of a flexible budget is to:

A)remove items from performance reports that are not controllable by managers.
B)permit managers to reduce the number of unfavorable variances that are reported.
C)update the static planning budget to reflect the actual level of activity of the period.
D)reduce the amount of conflict between departments when the master budget is prepareD.When a flexible budget is used in performance evaluation, actual costs are compared to what the costs should have been for the actual level of activity during the period rather than to the static planning budget.

Question 19

A spending variance is the difference between how much a cost should have been, given the actual level of activity, and the actual amount of the cost for the period.

Question 20

The revenue and spending variances are the differences between the static planning budget and the actual results for the period.

Question 21

At Jacobson Company, indirect labor is a variable cost that varies with direct labor-hours. Last month's performance report showed that actual indirect labor cost totaled $5,780 for the month and that the associated spending variance was $245

A)$0.20
B)$0.25
C)$0.30
D)$0.35
F)If 24,100 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour):

Question 22

Sissac Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $470 per month plus $101 per job plus $24 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in May to be 12 jobs and 123 meals, but the actual activity was 9 jobs and 126 meals. The actual cost for catering supplies in May was $4,240. The spending variance for catering supplies in May would be closest to:

A)$394 U
B)$394 F
C)$163 F
D)$163 U

Question 23

Thomasson Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $36,160 per month plus $2,038 per flight plus $1 per passenger. The company expected its activity in April to be 73 flights and 223 passengers, but the actual activity was 72 flights and 228 passengers. The actual cost for plane operating costs in April was $179,020. The activity variance for plane operating costs in April would be closest to:

A)$6,137 U
B)$6,137 F
C)$2,033 U
D)$2,033 F

Question 24

Kara Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $310 per month plus $84 per job plus $17 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in July to be 15 jobs and 127 meals, but the actual activity was 14 jobs and 126 meals. The actual cost for catering supplies in July was $3,620. The activity variance for catering supplies in July would be closest to:

A)$109 F
B)$109 U
C)$101 F
D)$101 U

Question 25

Bolick Midwifery's cost formula for its wages and salaries is $1,800 per month plus $152 per birth. For the month of May, the company planned for activity of 119 births, but the actual level of activity was 114 births. The actual wages and salaries for the month was $19,980. The activity variance for wages and salaries in May would be closest to:

A)$760 U
B)$92 U
C)$92 F
D)$760 F

Question 26

Bargas Framing's cost formula for its supplies cost is $2,240 per month plus $6 per frame. For the month of May, the company planned for activity of 808 frames, but the actual level of activity was 810 frames. The actual supplies cost for the month was $7,090. The supplies cost in the flexible budget for May would be closest to:

A)$7,088
B)$7,090
C)$7,106
D)$7,100

Question 27

Farver Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $44,420 per month plus $2,008 per flight plus $1 per passenger. The company expected its activity in May to be 80 flights and 281 passengers, but the actual activity was 81 flights and 277 passengers. The actual cost for plane operating costs in May was $199,650. The spending variance for plane operating costs in May would be closest to:

A)$5,691 F
B)$7,695 U
C)$7,695 F
D)$5,691 U

Question 28

Oscarson Midwifery's cost formula for its wages and salaries is $2,720 per month plus $351 per birth. For the month of September, the company planned for activity of 121 births, but the actual level of activity was 119 births. The actual wages and salaries for the month was $43,380. The wages and salaries in the planning budget for September would be closest to:

A)$45,191
B)$43,380
C)$44,489
D)$44,109

Question 29

Clovis Midwifery's cost formula for its wages and salaries is $2,680 per month plus $245 per birth. For the month of September, the company planned for activity of 118 births, but the actual level of activity was 121 births. The actual wages and salaries for the month was $33,290. The wages and salaries in the flexible budget for September would be closest to:

A)$32,393
B)$31,590
C)$32,325
D)$33,290

Question 30

Gradert Framing's cost formula for its supplies cost is $1,540 per month plus $12 per frame. For the month of September, the company planned for activity of 668 frames, but the actual level of activity was 666 frames. The actual supplies cost for the month was $9,980. The supplies cost in the planning budget for September would be closest to:

A)$10,010
B)$9,532
C)$9,556
D)$9,980

Question 31

Scarfo Hotel bases its budgets on guest-days. The hotel's static budget for December appears below: The total overhead cost at an activity level of 2,900 guest-days per month should be:

A)$20,680
B)$17,640
C)$24,360
D)$20,890

Question 32

Salyers Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below: The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 53 guests?

A)$7,159.20
B)$6,680.60
C)$7,184.80
D)$26,154.40

Question 33

Schlick Framing's cost formula for its supplies cost is $1,770 per month plus $12 per frame. For the month of August, the company planned for activity of 628 frames, but the actual level of activity was 631 frames. The actual supplies cost for the month was $9,790. The activity variance for supplies cost in August would be closest to:

A)$36 F
B)$484 F
C)$484 U
D)$36 U

Question 34

Wadhams Snow Removal's cost formula for its vehicle operating cost is $1,900 per month plus $430 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 21 snow-days. The actual vehicle operating cost for the month was $11,470. The vehicle operating cost in the planning budget for December would be closest to:

A)$10,930
B)$11,470
C)$8,739
D)$8,780

Question 35

Gummer Hospital bases its budgets on patient-visits. The hospital's static budget for February appears below: The total overhead cost at an activity level of 10,800 patient-visits per month should be:

A)$317,520
B)$303,810
C)$291,060
D)$302,850

Question 36

Stuchlik Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $430 per month plus $80 per job plus $14 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in January to be 20 jobs and 190 meals, but the actual activity was 21 jobs and 194 meals. The actual cost for catering supplies in January was $4,850. The catering supplies in the planning budget for January would be closest to:

A)$4,850
B)$4,619
C)$4,690
D)$4,826

Question 37

Stock Manufacturing Corporation has prepared the following overhead budget for next month. The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 6,600 machine-hours rather than 6,900 machine-hours?

A)$84,321.00
B)$87,590.00
C)$84,860.00
D)$83,781.74

Question 38

Whit Catering uses two measures of activity, jobs and meals, in the cost formulas in its budgets and performance reports. The cost formula for catering supplies is $380 per month plus $94 per job plus $11 per meal. A typical job involves serving a number of meals to guests at a corporate function or at a host's home. The company expected its activity in October to be 20 jobs and 216 meals, but the actual activity was 19 jobs and 221 meals. The actual cost for catering supplies in October was $4,790. The catering supplies in the flexible budget for October would be closest to:

A)$4,404
B)$4,790
C)$4,636
D)$4,597

Question 39

Orscheln Snow Removal's cost formula for its vehicle operating cost is $2,800 per month plus $381 per snow-day. For the month of February, the company planned for activity of 17 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $7,920. The activity variance for vehicle operating cost in February would be closest to:

A)$1,357 F
B)$1,357 U
C)$1,143 F
D)$1,143 U

Question 40

Petersheim Snow Removal's cost formula for its vehicle operating cost is $1,750 per month plus $484 per snow-day. For the month of November, the company planned for activity of 15 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $8,360. The vehicle operating cost in the flexible budget for November would be closest to:

A)$8,526
B)$8,409
C)$9,010
D)$8,360

Question 41

The activity variance for manufacturing overhead in May would be closest to:

A)$440 U
B)$440 F
C)$4,810 F
D)$4,810 U

Question 42

The selling and administrative expense in the flexible budget for April would be closest to:

A)$357,501
B)$359,900
C)$357,820
D)$364,490

Question 43

The manufacturing overhead in the flexible budget for May would be closest to:

A)$97,900
B)$98,422
C)$98,340
D)$102,710

Question 44

Zylka Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $47,400 per month plus $2,337 per flight plus $3 per passenger. The company expected its activity in April to be 67 flights and 263 passengers, but the actual activity was 62 flights and 267 passengers. The actual cost for plane operating costs in April was $189,760. The plane operating costs in the planning budget for April would be closest to:

A)$189,760
B)$193,095
C)$204,768
D)$205,063

Question 45

Hamner Corporation's flexible budget performance report for last month shows that actual indirect materials cost, a variable cost, was $45,240 and that the spending variance for indirect materials cost was $3,480 unfavorable. During that month, the company worked 17,400 machine-hours. Budgeted activity for the month had been 17,000 machine-hours. The cost formula per machine-hour for indirect materials cost must have been closest to:

A)$2.46
B)$2.87
C)$2.40
D)$2.80

Question 46

Celius Midwifery's cost formula for its wages and salaries is $2,410 per month plus $292 per birth. For the month of March, the company planned for activity of 113 births, but the actual level of activity was 116 births. The actual wages and salaries for the month was $35,340. The spending variance for wages and salaries in March would be closest to:

A)$942 F
B)$66 F
C)$66 U
D)$942 U

Question 47

Fudala Snow Removal's cost formula for its vehicle operating cost is $1,480 per month plus $308 per snow-day. For the month of March, the company planned for activity of 11 snow-days, but the actual level of activity was 16 snow-days. The actual vehicle operating cost for the month was $6,130. The spending variance for vehicle operating cost in March would be closest to:

A)$1,262 U
B)$278 F
C)$278 U
D)$1,262 F

Question 48

The materials and supplies in the flexible budget for November would be closest to:

A)$2,440
B)$1,541
C)$2,726
D)$2,406

Question 49

The selling and administrative expense in the planning budget for April would be closest to:

A)$357,820
B)$359,900
C)$364,490
D)$366,936

Question 50

The manufacturing overhead in the planning budget for May would be closest to:

A)$98,340
B)$97,900
C)$102,710
D)$102,165

Question 51

Newsom Footwear Corporation's flexible budget cost formula for supplies, a variable cost, is $2.61 per unit of output. The company's flexible budget performance report for last month showed a $6,840 unfavorable spending variance for supplies. During that month, 17,100 units were produced. Budgeted activity for the month had been 16,700 units. The actual cost per unit for indirect materials must have been closest to:

A)$3.01
B)$3.49
C)$3.41
D)$2.61

Question 52

Brayboy Tile Installation Corporation measures its activity in terms of square feet of tile installed. Last month, the budgeted level of activity was 1,360 square feet and the actual level of activity was 1,300 square feet. The company's owner budgets for supply costs, a variable cost, at $3.90 per square foot. The actual supply cost last month was $4,300. In the company's flexible budget performance report for last month, what would have been the spending variance for supply costs?

A)$770 F
B)$1,004 F
C)$198 F
D)$234 F

Question 53

The activity variance for selling and administrative expense in April would be closest to:

A)$4,590 F
B)$2,080 F
C)$2,080 U
D)$4,590 U

Question 54

Soehl Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 14,100 skeins and the actual level of activity was 13,700 skeins. The company's owner budgets for dye costs, a variable cost, at $0.40 per skein. The actual dye cost last month was $4,510. In the company's flexible budget performance report for last month, what would have been the spending variance for dye costs?

A)$970 F
B)$132 F
C)$160 F
D)$1,130 F

Question 55

Fussner Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,610 patient-visits and the actual level of activity was 1,670 patient-visits. The cost formula for administrative expenses is $3.30 per patient-visit plus $17,900 per month. The actual administrative expense was $24,600. In the clinic's flexible budget performance report for last month, the spending variance for administrative expenses was:

A)$1,387 U
B)$198 U
C)$69 U
D)$1,189 U

Question 56

The spending variance for manufacturing overhead in May would be closest to:

A)$4,370 U
B)$4,810 F
C)$4,810 U
D)$4,370 F

Question 57

The spending variance for selling and administrative expense in April would be closest to:

A)$4,590 F
B)$6,670 F
C)$6,670 U
D)$4,590 U

Question 58

The materials and supplies in the planning budget for November would be closest to:

A)$2,726
B)$2,406
C)$4,317
D)$2,440

Question 59

Lantto Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $34,810 per month plus $2,850 per flight plus $12 per passenger. The company expected its activity in June to be 70 flights and 292 passengers, but the actual activity was 69 flights and 291 passengers. The actual cost for plane operating costs in June was $236,550. The plane operating costs in the flexible budget for June would be closest to:

A)$237,814
B)$234,952
C)$236,550
D)$234,417

Question 60

Ingrum Framing's cost formula for its supplies cost is $1,120 per month plus $11 per frame. For the month of June, the company planned for activity of 611 frames, but the actual level of activity was 607 frames. The actual supplies cost for the month was $8,150. The spending variance for supplies cost in June would be closest to:

A)$353 F
B)$309 U
C)$353 U
D)$309 F

Question 61

The activity variance for selling and administrative expenses in April would be closest to:

A)$15 F
B)$645 F
C)$15 U
D)$645 U

Question 62

The activity variance for direct labor in April would be closest to:

A)$162 F
B)$162 U
C)$978 U
D)$978 F

Question 63

The activity variance for personnel expenses in September would be closest to:

A)$605 U
B)$605 F
C)$85 F
D)$85 U

Question 64

The activity variance for administrative expenses in October would be closest to:

A)$3 U
B)$263 U
C)$263 F
D)$3 F

Question 65

The cleaning equipment and supplies in the flexible budget for June would be closest to:

A)$4,450
B)$4,380
C)$5,368
D)$3,650

Question 66

The activity variance for materials and supplies in November would be closest to:

A)$320 U
B)$286 U
C)$286 F
D)$320 F

Question 67

The cleaning equipment and supplies in the planning budget for June would be closest to:

A)$3,650
B)$4,450
C)$2,978
D)$4,380

Question 68

The activity variance for net operating income in April would be closest to:

A)$372 U
B)$13,998 U
C)$13,998 F
D)$372 F

Question 69

The activity variance for net operating income in August would be closest to:

A)$30 F
B)$780 F
C)$30 U
D)$780 U

Question 70

The activity variance for administrative expenses in August would be closest to:

A)$72 F
B)$12 U
C)$72 U
D)$12 F

Question 71

The activity variance for selling and administrative expenses in June would be closest to:

A)$1,286 U
B)$4 U
C)$1,286 F
D)$4 F

Question 72

The activity variance for administrative expenses in September would be closest to:

A)$3 F
B)$103 F
C)$3 U
D)$103 U

Question 73

The activity variance for net operating income in September would be closest to:

A)$134 F
B)$306 U
C)$306 F
D)$134 U

Question 74

The activity variance for cleaning equipment and supplies in June would be closest to:

A)$800 F
B)$730 F
C)$730 U
D)$800 U

Question 75

The activity variance for direct labor in June would be closest to:

A)$312 F
B)$312 U
C)$1,592 U
D)$1,592 F

Question 76

The spending variance for materials and supplies in November would be closest to:

A)$34 F
B)$286 F
C)$34 U
D)$286 U

Question 77

The activity variance for personnel expenses in August would be closest to:

A)$428 F
B)$2,868 U
C)$2,868 F
D)$428 U

Question 78

The activity variance for net operating income in October would be closest to:

A)$2,581 U
B)$99 F
C)$2,581 F
D)$99 U

Question 79

The spending variance for cleaning equipment and supplies in June would be closest to:

A)$730 U
B)$70 U
C)$70 F
D)$730 F

Question 80

The activity variance for wages and salaries in October would be closest to:

A)$52 U
B)$652 F
C)$52 F
D)$652 U