Question 1

White Company budgeted fixed overhead costs of $200,000 and volume of 40,000 units. During the year, the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The spending variance relating to the fixed overhead cost is:
A) $10,000 favorable.
B) $10,000 unfavorable.
C) $5,000 favorable.
D) $5,000 unfavorable.

Accepted Answer

Spending variance = Actual fixed cost = Budgeted fixed cost
Spending variance = $210,000 − $200,000 = $10,000
Since actual costs are greater than the budgeted costs, the variance is unfavorable.

Question 2

The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00. Actual sales for October were 105,000 units and average selling price was $5.95. The sales volume variance was:
A) $30,000 favorable.
B) $30,000 unfavorable.
C) $29,750 favorable.
D) $29,750 unfavorable.

Accepted Answer

Sales volume variance = Static budget (based on planned volume) − Flexible budget (based on actual volume)
Sales volume variance = (100,000 units × $6.00 per unit) − (105,000 units × $6.00 per unit)
Sales volume variance = $600,000 − $630,000 = $30,000 favorable
Since the actual volume was greater than the planned volume, the variance is favorable.

Question 3

The following static budget is provided:  What will budgeted net income equal if 21,000 units are produced and sold? (Do not round intermediate calculations.)
A) $53,550
B) $55,500
C) $94,500
D) $210,000

Accepted Answer

11ea7feb_d1ef_628d_a768_2be5f8524880_TB3570_00_TB3570_00_TB3570_00

Question 4

When would a variance be labeled as favorable?
A) When actual costs are less than standard costs
B) When standard costs are equal to actual costs
C) When standard costs are less than actual costs
D) When estimated costs are greater than actual costs

Accepted Answer

A variance would be labeled as favorable when actual costs are less than standard costs. This means that the company is spending less money than they anticipated, which can lead to increased profits or lower prices for customers.

Question 5

Select the correct statement regarding flexible budgets.
A) A flexible budget can only be prepared for a single level of activity.
B) A flexible budget is not used for planning.
C) A flexible budget shows expected revenues and costs at a variety of activity levels.
D) A flexible budget is also known as the master budget.

Accepted Answer

A flexible budget shows the expected revenues and costs at a variety of activity levels. It is a tool used for performance evaluation and allows for adjustments based on actual results and changes in activity levels. Option A is incorrect because a flexible budget can be prepared for multiple levels of activity. Option B is incorrect because a flexible budget is used for planning and control purposes. Option D is incorrect because a flexible budget and master budget are two different types of budgets.

Question 6

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12. The sales revenue flexible budget variance was:
A) $6,120 favorable.
B) $6,000 unfavorable.
C) $17,880 favorable.
D) $17,880 unfavorable.

Accepted Answer

Sales revenue flexible budget variance = Actual sales − Flexible budget
Sales revenue flexible budget variance = (Actual units × Actual selling price) − (Actual units × Expected selling price)
Sales revenue flexible budget variance = (149,000 units × $6.12 per unit) − (149,000 units × $6.00 per unit)
Sales revenue flexible budget variance = $911,880 − $894,000 = $17,880 favorable
Since actual sales were greater than the flexible budget amount, the variance is favorable.

Question 7

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12. The sales volume variance was:
A) $6,120 favorable.
B) $6,000 unfavorable.
C) $17,880 favorable.
D) $17,880 unfavorable.

Accepted Answer

Sales volume variance = Static budget (based on planned volume) − Flexible budget (based on actual volume)
Sales volume variance = (150,000 units × $6.00 per unit) − (149,000 units × $6.00 per unit)
Sales volume variance = $900,000 − $894,000 = $6,000 unfavorable
Since the actual volume was less than the planned volume, the variance is unfavorable.

Question 8

Which of the following applications is most suited for developing flexible budgets?
A) Database
B) Graphics
C) Spreadsheet
D) Word processing

Accepted Answer

A spreadsheet is the best choice for developing flexible budgets as it allows for easy manipulation of numbers and calculations. It also allows for easy scenario analysis and can quickly generate different versions of the budget depending on various inputs.

Question 9

Assuming actual volume is 10,000 units and planned volume is 12,000 units, the sales volume variance in units:
A) Equals 2,000 units unfavorable.
B) Equals 2,000 units favorable.
C) Cannot be determined without additional information.
D) None of these answers is correct.

Accepted Answer

Sales volume variance (in units) = Static budget (that is, planned volume) − Flexible budget (that is, actual volume)
Sales volume variance (in units) = 12,000 units − 10,000 units = 2,000 units unfavorable
Since the actual volume was greater than the planned volume, the variance is favorable.
Since the actual volume was less than the planned volume, the variance is unfavorable.

Question 10

The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00. Actual sales for October were 105,000 units and average selling price was $5.95. The sales revenue flexible budget variance was:
A) $5,000 favorable.
B) $5,000 unfavorable.
C) $5,250 favorable.
D) $5,250 unfavorable.

Accepted Answer

Sales revenue flexible budget variance = Actual sales − Flexible budget
Sales revenue flexible budget variance = (Actual units × Actual selling price) − (Actual units × Expected selling price)
Sales revenue flexible budget variance = (105,000 units × $5.95 per unit) − (105,000 units × $6.00 per unit)
Sales revenue flexible budget variance = $624,750 − $630,000 = $5,250 favorable
Since actual sales were less than the flexible budget amount, the variance is unfavorable.

Question 11

A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:
A) Flexible budget variance.
B) Static budget variance.
C) Production activity variance.
D) Volume variance.

Accepted Answer

The answer of A difference between the static budget based...

Question 12

The Landrum Company provides the following standard cost data per unit of product: Variable overhead: $8.00
Landrum anticipated that they would produce and sell 24,000 units. During the period, the company produced and sold 25,000 units incurring $210,000 of variable overhead costs.
The variable overhead flexible budget variance was:
A) $8,000 unfavorable.
B) $10,000 unfavorable.
C) $8,000 favorable.
D) $10,000 favorable.

Accepted Answer

Variable overhead flexible variance = (Actual cost per unit of product − Standard cost per unit of product) × Actual units
Variable overhead flexible variance = Actual variable overhead cost − (Standard cost per unit of product × Actual units)
Variable overhead flexible variance = $210,000 − ($8.00 per unit × 25,000 units)
Variable overhead flexible variance = $210,000 − $200,000 = $10,000
Since the actual cost is greater than the flexible budget, the variance is unfavorable.

Question 13

Burruss Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 8,000 units:  If actual production totals 10,000 units which is within the relevant range, the flexible budget would show fixed costs of:
A) $16,000.
B) $2 per unit.
C) $20,000.
D) None of these answers is correct.

Accepted Answer

Based on 8,000 units:
Total budgeted fixed costs = 8,000 units × $2.00 per unit = $16,000
This amount is unchanged if the flexible budget is prepared at a level of 10,000 units.

Question 14

The following static budget is provided:  What will be the overall volume variance if 12,000 units are produced and sold?
A) $80,000 F
B) $80,000 U
C) $60,000 U
D) $160,000 U

Accepted Answer

11ea7feb_d1ef_3b7b_a768_ab7de72fb62f_TB3570_00_TB3570_00_TB3570_00 *Per unit amount × 12,000 units

Question 15

Volume variances are computed for which of the following costs?
A) Fixed manufacturing costs only
B) Variable selling and administrative costs only
C) Variable manufacturing and selling and administrative costs
D) Variable manufacturing costs only

Accepted Answer

Variances occur only because the budgets are created using different volumes of activity. Since total fixed cost is not affected by the level of activity, there will be no fixed cost variances associated with static versus flexible budgets.

Question 16

Which of the following reason(s) cause flexible budgets to be useful planning tools?
A) Flexible budgets allow managers to anticipate results under a variety of scenarios.
B) Flexible budgets can help determine if a company's cash position is adequate.
C) Flexible budgets can help managers judge if materials and storage facilities are appropriate for various production levels.
D) All of these answers are correct.

Accepted Answer

All of the given reasons are correct and valid in showing how flexible budgets can be useful planning tools.

Question 17

When would a variance be labeled as unfavorable?
A) When standard costs are more than actual costs
B) When expected sales are less than actual sales
C) When actual sales are equal to expected sales
D) None of these answers is correct.

Accepted Answer

The answer of When would a variance be labeled as...

Question 18

The following standard cost card is provided for Navid Company's Product A:  The fixed overhead rate is based on total budgeted fixed overhead of $12,000. During the period, the company produced and sold 5,800 units at the following costs:
Direct material 12,200 pounds @ $4.80 per pound
Direct labor 5,950 hours @ $8.00 per hour
Overhead $29,920
The standard manufacturing cost per unit is $23.00. What is the actual manufacturing cost per unit? (Do not round intermediate calculations.)
A) $23.46.
B) $36.16.
C) $17.96.
D) Cannot be determined from the information provided.

Accepted Answer

Actual manufacturing costs = Direct materials cost + Direct labor cost + Overhead cost
Actual manufacturing costs = (12,200 pounds × $4.80 per pound) + (5,950 hours × $8.00 per hour) + $29,920 = $58,560 + $47,600 + $29,920 = $136,080
Actual manufacturing costs per unit = $136,080 ÷ 5,800 units = $23.46

Question 19

Jones Company developed the following static budget at the beginning of the company's accounting period:  If actual production totals 8,200 units, the flexible budget would show total costs of:
A) $8,000.
B) $8,100.
C) $8,200.
D) None of these is correct.

Accepted Answer

Based on 8,200 units:
Total budgeted costs = Variable costs + Fixed costs
Total budgeted costs = ($4,000 ÷ 8,000 units × 8,200 units) + $4,000 = $8,100

Question 20

Static and flexible budgets are similar in that:
A) They both are based on the same per unit variable amounts and the same fixed costs.
B) They both concentrate solely on costs.
C) They both are prepared for multiple activity levels.
D) None of these answers is correct.

Accepted Answer

Flexible budgets differ from static budgets in that they show expected revenues and costs at a variety of volume levels; however, the same per unit variable costs and total fixed costs are used in both.

Quiz 15: Performance Evaluation

White Company budgeted fixed overhead costs of $200,000 and volume of 40,000 units. During the year, the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The spending variance relating to the fixed overhead cost is:

The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00. Actual sales for October were 105,000 units and average selling price was $5.95. The sales volume variance was:

The following static budget is provided: What will budgeted net income equal if 21,000 units are produced and sold? (Do not round intermediate calculations.)

When would a variance be labeled as favorable?

Select the correct statement regarding flexible budgets.

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12. The sales revenue flexible budget variance was:

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12. The sales volume variance was:

Which of the following applications is most suited for developing flexible budgets?

Assuming actual volume is 10,000 units and planned volume is 12,000 units, the sales volume variance in units:

The Ferguson Company estimated that October sales would be 100,000 units with an average selling price of $6.00. Actual sales for October were 105,000 units and average selling price was $5.95. The sales revenue flexible budget variance was:

A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:

Burruss Company developed a static budget at the beginning of the company's accounting period based on an expected volume of 8,000 units: If actual production totals 10,000 units which is within the relevant range, the flexible budget would show fixed costs of:

The following static budget is provided: What will be the overall volume variance if 12,000 units are produced and sold?

Volume variances are computed for which of the following costs?

Which of the following reason(s) cause flexible budgets to be useful planning tools?

When would a variance be labeled as unfavorable?

Jones Company developed the following static budget at the beginning of the company's accounting period: If actual production totals 8,200 units, the flexible budget would show total costs of:

Static and flexible budgets are similar in that: