Question 1

Thomas Corporation sells a unit of its product for $12.00,resulting in a contribution margin of $7.00 per unit.Fixed costs are budgeted at $50,000 per quarter for volumes up to 12,000 units and $80,000 for volumes exceeding 12,000 units.
Prepare the flexible budget for the next quarter for volume levels of 11,000,13,000,and 16,000 units.

Accepted Answer

The answer of Thomas Corporation sells a unit of its...

Question 2

Southern Instruments makes calculators for business applications.The budgeted selling price is $120 per calculator,the variable rate is $98 per calculator and budgeted fixed costs are $150,000 per month.What is the budgeted operating income for 15,000 calculators sold in a month?
A)$330,000
B)$1,620,000
C)$1,800,000
D)$180,000

Accepted Answer

D)
Revenue (# of units × selling price per unit)15,000 × 120 = $1,800,000
Variable Costs (# of units × variable cost per unit)15,000 × 98 = $1,470,000
Fixed costs $150,000
Total expenses 1,470,000 + 150,000 = $1,620,000
Operating income 1,800,000 - 1,620,000 = $180,000

Question 3

With regard to a static budget instead of a flexible budget,which of the following is true?
A)A static budget is adjusted for changes in the level of sales activity.
B)A static budget is a budget that stays the same from one period to the next.
C)A static budget is prepared for only one level of sales activity.
D)A static budget is also known as a fixed budget.

Accepted Answer

A static budget is prepared for only one level of sales activity and does not adjust for changes in the level of sales activity. Option A is incorrect because a flexible budget is adjusted for changes in the level of sales activity. Option B is incorrect because a static budget may change from one period to the next, but only for adjusting for inflation or other uncontrollable factors. Option D is incorrect because a fixed budget is a budget where the total amount of spending is fixed, but it can be either static or flexible.

Question 4

The difference between the actual revenues and expenses and the master budget is known as a
A)capital budget variance.
B)flexible budget variance.
C)static budget variance.
D)master budget variance.

Accepted Answer

The answer of The difference between the actual revenues and...

Question 5

A graph of a flexible budget formula reflects fixed costs of $45,000 per month and total costs of $100,000 at a volume of 5,000 units.Assuming the relevant range is 1,000 to 20,000 units,the graph would reflect total monthly costs at 15,000 units of what dollar amount?
A)$210,000
B)$100,000
C)$345,000
D)$165,000

Accepted Answer

A)
Total costs $100,000
Fixed costs $(45,000)
Variable costs $55,000
Initial volume 5,000
Variable cost per unit $11 = 55,000 / 5,000
Variable cost per unit $11
Target units 15,000
Variable costs at target volume $165,000 = 15,000 × 11
Fixed costs + 45,000
Total costs at target volume $210,000

Question 6

Civic Corporation provided the following partially completed monthly flexible budget.Complete the flexible budget.

Accepted Answer

The answer of Civic Corporation provided the following partially completed...

Question 7

Peddlin' Pete's Cycles sells its entry-level bicycles for $400 each.Its variable cost is $250 per bicycle.Fixed costs are $35,000 per month for volumes up to 1,200 bicycles.Above 1,200 bicycles,monthly fixed costs are $55,000.What is the budgeted operating income at a level of 1,300 bicycles per month?
A)$195,000
B)$465,000
C)$140,000
D)$160,000

Accepted Answer

C)
Revenue (# of units × selling price per unit)1,300 × 400 = $520,000
Variable Costs (# of units × variable cost per unit)1,300 × 250 = $325,000
Fixed expenses $55,000
Total expenses 325,000 + 55,000 = 380,000
Operating income 520,000 - 380,000 = 140,000

Question 8

The ________ is the optimum budget to managers that plan revenues and expenses at different sales volumes.
A)flexible budget
B)capital budget
C)static budget
D)master budget

Accepted Answer

Flexible budget is designed to adjust to changes in sales volume and provides managers with a more accurate picture of expected revenues and expenses at different sales volumes. Capital budget is focused on long-term investments in fixed assets, while static budget remains unchanged regardless of changes in sales volume. Master budget is an overall financial plan that includes all the individual budgets of a company.

Question 9

The flexible budget total cost formula applies only to a specific relevant range.

Accepted Answer

The flexible budget total cost formula is based on the specific relevant range, which means it applies only within that particular range. If the level of activity increases or decreases beyond this range, a new formula or budget would need to be developed.

Question 10

Summer Nights sells bottles of bug spray for $6.50 each.Variable costs are $3.00 per bottle,while fixed costs are $44,000 per month for volumes up to 30,000 bottles of spray and $54,000 per month for volumes above 30,000 bottles of spray.The flexible budget would reflect monthly operating income for 19,000 bottles of lotion and 24,000 bottles of lotion of what dollar amounts?
A)$79,500 and $40,000,respectively
B)$22,500 and $40,000,respectively
C)$123,500 and $156,000,respectively
D)$12,500 and $102,000,respectively

Accepted Answer

B)
Flexible Budget Level 1 output Level 2 output
Output units 19,000 24,000
Revenue $123,500 $156,000
(# of units × selling price)(19,000 × 6.50)(24,000 × 6.50)
Variable Costs $57,000 $72,000
(# of units × variable cost per unit)(19,000 × 3.00)(24,000 × 3.00)
Fixed expenses $44,000 $44,000
Total expenses $101,000 $116,000
(57,000 + 44,000)(72,000 + 44,000)
Operating income $22,500 $40,000
(123,500 - 101,000)(156,000 - 116,000)

Question 11

Platz Company makes chairs.The budgeted selling price is $45 per chair,the variable rate is $15 per chair and budgeted fixed costs are $40,000 per month.What is the budgeted operating income for 3,200 chairs sold in a month?
A)$88,000
B)$96,000
C)$56,000
D)$144,000

Accepted Answer

C)
Revenue (# of units × selling price per unit)3,200 × 45 = $144,000
Variable Costs (# of units × variable cost per unit)3,200 × 15 = $48,000
Fixed costs $40,000
Total expenses 48,000 + 40,000 = $88,000
Operating income 144,000 - 88,000 = $56,000

Question 12

Flexible budgets are budgets that summarize cost and revenue information for a single volume level.

Accepted Answer

Flexible budgets summarize cost and revenue information for multiple volume levels.

Question 13

Sound Design sells its computer speakers for $115 per set.Its variable cost is $75 per set of speakers.Fixed costs are $80,000 per month for volumes up to 2,400 sets of speakers.Above 2,400 sets,monthly fixed costs are $115,000.What is the budgeted operating income (loss)at a sales level of 2,600 sets of speakers per month?
A)Operating loss of $11,000
B)Operating income of $104,000
C)Operating income of $24,000
D)Operating income of $184,000

Accepted Answer

A)
Revenue (# of units × selling price per unit)2,600 × 115 =$299,000
Variable Costs (# of units × variable cost per unit)2,600 × 75 = $195,000
Fixed expenses $115,000
Total expenses 195,000 + 115,000 = 310,000
Operating income 299,000 - 310,000 = (11,000)

Question 14

The ________ is a budget based on multiple levels of projected sales or production.
A)standard budget
B)flexible budget
C)static budget
D)fixed budget

Accepted Answer

A flexible budget is a budget that is based on multiple levels of projected sales or production. It allows for adjustments to be made based on actual sales or production levels, making it more adaptable to changes in the business environment. A standard budget, on the other hand, is based on a single level of projected sales or production, while a static budget remains fixed regardless of actual sales or production levels. A fixed budget is similar to a static budget in that it does not allow for adjustments based on actual sales or production levels.

Question 15

With regard to flexible budgets,which of the following statements is true?
A)They are prepared for one level of sales volume.
B)Managers use them to help plan for uncertainties.
C)They are prepared by the accounting department on an annual basis.
D)They are designed to estimate revenues only.

Accepted Answer

Flexible budgets are used to help managers plan for uncertainties, such as changes in sales volume or cost behavior. They are not prepared for only one level of sales volume or designed to estimate revenues only. Although the accounting department may be involved in preparing the flexible budget, it is not prepared on an annual basis.

Question 16

Sound Design sells its computer speakers for $115 per set.Its variable cost is $75 per set of speakers.Fixed costs are $80,000 per month for volumes up to 2,400 sets of speakers.Above 2,400 sets,monthly fixed costs are $115,000.What is the budgeted operating income (loss)at a sales level of 2,300 sets of speakers per month?
A)Operating loss of $23,000
B)Operating income of $92,000
C)Operating income of $12,000
D)Operating income of $184,500

Accepted Answer

C)
Revenue (# of units × selling price per unit)2,300 × 115 =$264,500
Variable Costs (# of units × variable cost per unit)2,300 × 75 = $172,500
Fixed expenses $80,000
Total expenses 172,500 + 80,000 = $252,500
Operating income 264,500 - 252,500 = $12,000

Question 17

Both the static budget and the flexible budget used for performance evaluation are developed before the period of actual production.

Accepted Answer

A static budget is developed before the period of actual production, but a flexible budget is adjusted during or after the period to reflect actual activity levels.

Question 18

Davis Corporation manufactures and sells portable radios.The radio sells for $35 per unit and its variable costs per unit are $30.Fixed costs are $64,000 per month for sales volumes up to 32,000 radios.If more than 32,000 radios are sold,the fixed costs will be $83,000.The flexible budget would reflect what monthly operating income for a sales volume of 41,000 radios?
A)$141,000
B)$122,000
C)$1,435,000
D)$205,000

Accepted Answer

B)
Output units 41,000
Revenue (# of units × selling price)41,000 × 35 =$1,435,000
Variable Costs (# of units × variable cost per unit)41,000 × 30 = $1,230,000
Fixed expenses $83,000
Total expenses 1,230,000 + 83,000 = $1,313,000
Operating income 1,435,000 - 1,313,000 = $122,000

Question 19

A company's flexible budget for 93,000 units of production showed sales of $300,000;variable costs of $150,000;and fixed costs of $90,000.What net operating income would you expect the company to earn if it produces and sells 98,000 units? (Assume 98,000 units is in the relevant range. )

Accepted Answer

The answer of A company's flexible budget for 93,000 units...

Question 20

Peddlin' Pete's Cycles sells its entry-level bicycles for $400 each.Its variable cost is $250 per bicycle.Fixed costs are $35,000 per month for volumes up to 1,200 bicycles.Above 1,200 bicycles,monthly fixed costs are $55,000.What is the budgeted operating income at a level of 900 bicycles per month?
A)$100,000
B)$135,000
C)$325,000
D)$80,000

Accepted Answer

A)
Revenue (# of units × selling price per unit)900 × 400 = $360,000
Variable Costs (# of units × variable cost per unit)900 × 250 = $225,000
Fixed expenses $35,000
Total expenses $260,000 = 225,000 + 35,000
Operating income 360,000 - 260,000 = $100,000

Quiz 10: Performance Evaluation

Southern Instruments makes calculators for business applications.The budgeted selling price is $120 per calculator,the variable rate is $98 per calculator and budgeted fixed costs are $150,000 per month.What is the budgeted operating income for 15,000 calculators sold in a month?

With regard to a static budget instead of a flexible budget,which of the following is true?

The difference between the actual revenues and expenses and the master budget is known as a

A graph of a flexible budget formula reflects fixed costs of $45,000 per month and total costs of $100,000 at a volume of 5,000 units.Assuming the relevant range is 1,000 to 20,000 units,the graph would reflect total monthly costs at 15,000 units of what dollar amount?

Civic Corporation provided the following partially completed monthly flexible budget.Complete the flexible budget.

The ________ is the optimum budget to managers that plan revenues and expenses at different sales volumes.

The flexible budget total cost formula applies only to a specific relevant range.

Platz Company makes chairs.The budgeted selling price is $45 per chair,the variable rate is $15 per chair and budgeted fixed costs are $40,000 per month.What is the budgeted operating income for 3,200 chairs sold in a month?

Flexible budgets are budgets that summarize cost and revenue information for a single volume level.

The ________ is a budget based on multiple levels of projected sales or production.

With regard to flexible budgets,which of the following statements is true?

Both the static budget and the flexible budget used for performance evaluation are developed before the period of actual production.

A company's flexible budget for 93,000 units of production showed sales of $300,000;variable costs of $150,000;and fixed costs of $90,000.What net operating income would you expect the company to earn if it produces and sells 98,000 units? (Assume 98,000 units is in the relevant range. )