Question 1

Dehnert Midwifery's cost formula for its wages and salaries is $2, 030 per month plus $409 per birth.For the month of May, the company planned for activity of 112 births, but the actual level of activity was 114 births.The actual wages and salaries for the month was $50, 800.The wages and salaries in the planning budget for May would be closest to:
A)$47, 838
B)$50, 800
C)$49, 909
D)$48, 656

Accepted Answer

Cost = Fixed cost + (Variable cost per unit × q)
= $2, 030 + ($409 × 112)= $47, 838

Question 2

Comparing actual results to a budget based on the actual activity for the period is possible with the use of a:
A)monthly budget.
B)master budget.
C)flexible budget.
D)rolling budget.

Accepted Answer

A flexible budget is designed to adjust to changes in the level of activity, making it the best choice for comparing actual results to a budget based on the actual activity for the period. A monthly budget is fixed and does not adjust for changes in activity levels. A master budget is an overall plan that may not reflect actual activity for a period. A rolling budget is a continuous budget that is updated regularly based on new information, but it may not reflect actual activity for a specific period.

Question 3

A static planning budget is:
A)a budget for a single level of activity.
B)a budget that ignores inflation.
C)used only for fixed costs.
D)used when the mix of products does not change.

Accepted Answer

A static planning budget is designed for a single level of activity, irrespective of whether the actual output is different. It assumes that fixed costs remain constant and that variable costs remain proportional to the level of output. Therefore, choice A, a budget for a single level of activity, is the correct answer. The other options are incorrect because a static planning budget can account for inflation, be used for both fixed and variable costs and can also accommodate changes in the mix of products.

Question 4

Fuhrer 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 7, 500 guest-days per month should be:
A)$227, 250
B)$215, 140
C)$216, 140
D)$206, 040

Accepted Answer

The answer of Fuhrer Hotel bases its budgets on guest-days.The...

Question 5

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

Accepted Answer

Since the actual level of activity is 4% less than planned, the variable costs should also decrease by 4% in order to accurately compare them to the actual costs. This is because variable costs are directly tied to the level of activity, and a decrease in activity will result in a corresponding decrease in variable costs.

Question 6

In a flexible budget performance report, actual costs should be compared to the flexible budget at the original budgeted activity level.

Accepted Answer

In a flexible budget performance report, actual costs should be compared to the flexible budget at the actual activity level, not the original budgeted activity level. The flexible budget adjusts for changes in activity levels and therefore provides a more accurate comparison to actual costs.

Question 7

A major weakness of flexible budgets is that:
A)they are valid for only a single level of activity.
B)they ignore fixed costs.
C)they compare actual costs at one level of activity to budgeted costs at a different level of activity.
D)none of these is a major weakness of flexible budgets.

Accepted Answer

The answer of A major weakness of flexible budgets is...

Question 8

Hatzenbuhler 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, 800 machine-hours?
A)$107, 824.00
B)$110, 600.00
C)$108, 300.00
D)$107, 347.06

Accepted Answer

Variable cost per MH for supplies = $22, 440 ÷ 6, 800 MHs = $3.30 per MH
Variable cost per MH for indirect labor = $55, 760 ÷ 6, 800 MHs = $8.20 per MH
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Question 9

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

Accepted Answer

Directly comparing static budget costs to actual costs can make sense for both variable and fixed costs. However, it is important to evaluate the reasons for any variances between the two and adjust the budget accordingly moving forward.

Question 10

Akey Hospital bases its budgets on patient-visits.The hospital's static budget for March appears below:  The total overhead cost at an activity level of 3, 000 patient-visits per month should be:
A)$97, 800
B)$92, 100
C)$88, 020
D)$92, 640

Accepted Answer

The answer of Akey Hospital bases its budgets on patient-visits.The...

Question 11

A static planning budget is suitable for planning but is inappropriate for evaluating how well costs are controlled.

Accepted Answer

A static planning budget is prepared based on a set of assumptions and is not adjusted for changes in actual results. Therefore, it cannot be used to evaluate how well costs are controlled because there may be variations in actual expenses compared to the budget due to external factors or unforeseeable circumstances. Instead, a flexible budget or variance analysis should be used for cost control evaluation.

Question 12

Pettry Snow Removal's cost formula for its vehicle operating cost is $2, 170 per month plus $408 per snow-day.For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 13 snow-days.The actual vehicle operating cost for the month was $7, 600.The vehicle operating cost in the planning budget for December would be closest to:
A)$7, 474
B)$9, 354
C)$8, 698
D)$7, 600

Accepted Answer

Cost = Fixed cost + (Variable cost per unit × q)
= $2, 170 + ($408 × 16)= $8, 698

Question 13

Peixoto Framing's cost formula for its supplies cost is $1, 150 per month plus $14 per frame.For the month of July, the company planned for activity of 556 frames, but the actual level of activity was 555 frames.The actual supplies cost for the month was $9, 190.The supplies cost in the planning budget for July would be closest to:
A)$8, 920
B)$9, 207
C)$8, 934
D)$9, 190

Accepted Answer

Cost = Fixed cost + (Variable cost per unit × q)
= $1, 150 + ($14 × 556)= $8, 934

Question 14

Which of the following comparisons best isolates the impact that changes in operating efficiency have 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

Accepted Answer

The comparison of flexible budget and actual results isolates the impact of changes in operating efficiency as it takes into account changes in output levels and adjusts the budget accordingly, allowing for a more accurate analysis of actual performance. Static planning budget only takes into account one output level, while actual results can be affected by numerous factors, making it difficult to pinpoint the impact of changes in operating efficiency. Master budget and static planning budget are similar in that they are both fixed budget plans and do not take into account changes in operating efficiency.

Question 15

Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month.When the actual level of activity is less than budgeted, which of the following would be true?
A)Variable costs would show favorable variances.
B)Variable costs would show unfavorable variances.
C)Fixed costs would show favorable variances.
D)Fixed costs would show unfavorable variances.

Accepted Answer

When the actual level of activity is less than budgeted, variable costs would show favorable variances because the costs that were planned for higher production or sales did not occur due to the lower activity level, resulting in lower variable costs. However, fixed costs would show unfavorable variances as they are typically fixed in nature and do not change with changes in the level of activity.

Question 16

Tulip Midwifery's cost formula for its wages and salaries is $2, 420 per month plus $388 per birth.For the month of January, the company planned for activity of 119 births, but the actual level of activity was 123 births.The actual wages and salaries for the month was $50, 540.The wages and salaries in the flexible budget for January would be closest to:
A)$50, 540
B)$48, 592
C)$50, 144
D)$50, 225

Accepted Answer

Cost = Fixed cost + (Variable cost per unit × q)
= $2, 420 + ($388 × 123)= $50, 144

Question 17

Ohme Framing's cost formula for its supplies cost is $1, 620 per month plus $13 per frame.For the month of April, the company planned for activity of 882 frames, but the actual level of activity was 878 frames.The actual supplies cost for the month was $13, 500.The supplies cost in the flexible budget for April would be closest to:
A)$13, 086
B)$13, 500
C)$13, 034
D)$13, 027

Accepted Answer

Cost = Fixed cost + (Variable cost per unit × q)
= $1, 620 + ($13 × 878)= $13, 034

Question 18

A flexible budget report should contain variable costs and mixed costs but not fixed costs.

Accepted Answer

A flexible budget report should contain all types of costs, including variable, fixed, and mixed costs. This is because a flexible budget adjusts for changes in activity levels, so all costs should be taken into account.

Question 19

Papenfuss 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 76 guests?
A)$52, 848.40
B)$8, 343.40
C)$8, 274.40
D)$7, 373.24

Accepted Answer

Variable cost per guest for supplies = $86.00 ÷ 86 guests = $1.00 per guest
Variable cost per guest for laundry = $507.40 ÷ 86 guests = $5.90 per guest
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Question 20

Towne Snow Removal's cost formula for its vehicle operating cost is $1, 470 per month plus $399 per snow-day.For the month of November, the company planned for activity of 13 snow-days, but the actual level of activity was 9 snow-days.The actual vehicle operating cost for the month was $5, 230.The vehicle operating cost in the flexible budget for November would be closest to:
A)$6, 657
B)$5, 230
C)$4, 609
D)$5, 061

Accepted Answer

Cost = Fixed cost + (Variable cost per unit × q)
= $1, 470 + ($399 × 9)= $5, 061

Quiz 9: Flexible Budgets and Performance Analysis

Comparing actual results to a budget based on the actual activity for the period is possible with the use of a:

A static planning budget is:

Fuhrer 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 7, 500 guest-days per month should be:

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

In a flexible budget performance report, actual costs should be compared to the flexible budget at the original budgeted activity level.

A major weakness of flexible budgets is that:

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

Akey Hospital bases its budgets on patient-visits.The hospital's static budget for March appears below: The total overhead cost at an activity level of 3, 000 patient-visits per month should be:

A static planning budget is suitable for planning but is inappropriate for evaluating how well costs are controlled.

Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance?

Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month.When the actual level of activity is less than budgeted, which of the following would be true?

A flexible budget report should contain variable costs and mixed costs but not fixed costs.