Question 1

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of sales for 20,000 units would be:
A) $165,000.
B) $150,000.
C) $117,272.
D) $181,500.
E) $141,900.

Accepted Answer

Sales = variable costs + fixed costs + operating income.
Sales @ 22,000 units = $99,000 + $30,000 + $36,000 = $165,000
Selling price per unit = $165,000/22,000 = $7.50 per unit
Budgeted sales @ 20,000 units = $7.50 × 20,000 = $150,000

Question 2

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is:
A) $2,667.
B) $14,000.
C) $18,667.
D) $24,000.
E) $35,000.

Accepted Answer

Selling price per unit = $48,000/12,000 units = $4.00 per unit
Variable costs per unit = $18,000/12,000 = $1.50 per unit
Contribution margin per unit = $4.00 − $1.50 = $2.50 per unit
Expected operating income for 16,000 units:
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Question 3

A company's flexible budget for 12,000 units of production showed total contribution margin of $24,000 and fixed costs, $16,000. The operating income expected if the company produces and sells 15,000 units is:
A) $34,000.
B) $10,000.
C) $18,667.
D) $8,000.
E) $14,000.

Accepted Answer

Contribution margin per unit = $24,000/12,000 = $2.00 per unit
Expected operating income for 15,000 units:
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Question 4

A company's flexible budget for 12,000 units of production showed per unit contribution margin of $3.00 and fixed costs, $20,000. The operating income expected if the company produces and sells 18,000 units is:
A) $34,000.
B) $10,000.
C) $18,667.
D) $16,000.
E) $24,000.

Accepted Answer

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Question 5

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials price variance is: 
A) $27,500 unfavorable.
B) $50,000 unfavorable.
C) $50,000 favorable.
D) $22,500 unfavorable.
E) $22,500 favorable.

Accepted Answer

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Question 6

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of variable costs for 20,000 units would be:
A) $99,000.
B) $90,000.
C) $66,000.
D) $30,000.
E) $150,000.

Accepted Answer

Variable cost per unit = $99,000/22,000 = $4.50 per unit
Budgeted variable costs @ 20,000 units = $4.50 × 20,000 = $90,000

Question 7

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The contribution margin expected if the company produces and sells 16,000 units is:
A) $48,000.
B) $64,000.
C) $40,000.
D) $24,000.
E) $18,000.

Accepted Answer

Selling price per unit = $48,000/12,000 units = $4.00 per unit
Variable costs per unit = $18,000/12,000 = $1.50 per unit
Contribution margin per unit = $4.00 − $1.50 = $2.50 per unit
Expected contribution margin for 16,000 units = $2.50 per unit × 16,000 units = $40,000.

Question 8

Georgia, Inc. has collected the following data on one of its products. The direct materials quantity variance is: 
A) $30,000 favorable.
B) $13,750 unfavorable.
C) $16,250 favorable.
D) $30,000 unfavorable.
E) $13,750 favorable.

Accepted Answer

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Question 9

Based on a predicted level of production and sales of 12,000 units, a company anticipates reporting operating income of $26,000 after deducting variable costs of $72,000 and fixed costs of $10,000. Based on this information, the budgeted amounts of fixed and variable costs for 15,000 units would be:
A) $10,000 of fixed costs and $72,000 of variable costs.
B) $10,000 of fixed costs and $90,000 of variable costs.
C) $12,500 of fixed costs and $90,000 of variable costs.
D) $12,500 of fixed costs and $72,000 of variable costs.
E) $10,000 of fixed costs and $81,000 of variable costs.

Accepted Answer

Fixed costs should remain fixed at $10,000
Variable costs per unit = $72,000/12,000 units = $6.00 per unit
Variable costs = $6.00 per unit × 15,000 units = $90,000

Question 10

Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:
A) $125,000 fixed and $102,500 variable.
B) $125,000 fixed and $123,000 variable.
C) $102,500 fixed and $150,000 variable.
D) $150,000 fixed and $123,000 variable.
E) $150,000 fixed and $102,500 variable.

Accepted Answer

Fixed costs remain at $150,000
Variable costs = ($123,000/12,000) × 10,000 units = $102,500

Question 11

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of fixed costs for 20,000 units would be:
A) $99,000.
B) $90,000.
C) $66,000.
D) $30,000.
E) $150,000.

Accepted Answer

Fixed costs remain constant for all production levels within the relevant range.

Question 12

Georgia, Inc. has collected the following data on one of its products. The actual cost of direct materials used is: 
A) $133,750.
B) $150,000.
C) $106,250.
D) $158,750.
E) $120,000.

Accepted Answer

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Question 13

Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?
A) $12,500.
B) $25,000.
C) $20,000.
D) $30,000.
E) $35,000.

Accepted Answer

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Question 14

Which department is often responsible for the direct materials price variance?
A) The accounting department.
B) The production department.
C) The purchasing department.
D) The finance department.
E) The budgeting department.

Accepted Answer

The purchasing department is responsible for negotiating and purchasing direct materials, so they are usually held responsible for the direct materials price variance.

Question 15

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is: 
A) $13,750 unfavorable.
B) $16,250 unfavorable.
C) $16,250 favorable.
D) $30,000 unfavorable.
E) $33,000 favorable.

Accepted Answer

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Question 16

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The fixed costs expected if the company produces and sells 16,000 units is:
A) $16,000.
B) $64,000.
C) $48,000.
D) $24,000.
E) $18,000.

Accepted Answer

Fixed costs remain constant at all levels within the relevant range.

Question 17

Based on a predicted level of production and sales of 30,000 units, a company anticipates total contribution margin of $105,000, fixed costs of $40,000, and operating income of $65,000. Based on this information, the budgeted operating income for 28,000 units would be:
A) $52,000.
B) $135,333.
C) $58,000.
D) $72,500.
E) $105,000.

Accepted Answer

Unit contribution margin = $105,000/30,000 = $3.50.
Budgeted operating income @ 28,000 units = ($3.50 × 28,000) − $40,000 = $58,000

Question 18

A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000. Calculate the expected level of operating income if the company produces and sells 13,000 units.
A) $110,500.
B) $85,000.
C) $133,000.
D) $100,000.
E) $50,500.

Accepted Answer

Selling price per unit = $200,000/10,000 units = $20.00 per unit
Variable cost per unit = $40,000/10,000 units = $4.00 per unit
Contribution margin per unit = $20.00 − $4.00 = $16.00 per unit
Expected operating income:
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Question 19

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of contribution margin for 20,000 units would be:
A) $99,000.
B) $90,000.
C) $66,000.
D) $150,000.
E) $60,000.

Accepted Answer

Sales = variable costs + fixed costs + operating income.
Sales @ 22,000 units = $99,000 + $30,000 + $36,000 = $165,000
Selling price per unit = $165,000/22,000 = $7.50 per unit
Variable cost per unit = $99,000/22,000 = $4.50 per unit
Contribution margin per unit = $7.50 per unit − $4,50 per unit = $3.00 per unit
Budgeted contribution margin @ 20,000 units = $3.00 × 20,000 = $60,000

Question 20

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of operating income for 20,000 units would be:
A) $30,000.
B) $60,000.
C) $69,000.
D) $150,000.
E) $32,727.

Accepted Answer

Sales = variable costs + fixed costs + operating income.
Sales @ 22,000 units = $99,000 + $30,000 + $36,000 = $165,000
Selling price per unit = $165,000/22,000 = $7.50 per unit
Variable cost per unit = $99,000/22,000 = $4.50 per unit
Contribution margin per unit = $7.50 per unit − $4,50 per unit = $3.00 per unit
Budgeted contribution margin @ 20,000 units = $3.00 × 20,000 = $60,000
Budgeted operating income = $60,000 contribution margin − $30,000 fixed costs = $30,000.

Quiz 8: Flexible Budgets and Standard Costs

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of sales for 20,000 units would be:

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is:

A company's flexible budget for 12,000 units of production showed total contribution margin of $24,000 and fixed costs, $16,000. The operating income expected if the company produces and sells 15,000 units is:

A company's flexible budget for 12,000 units of production showed per unit contribution margin of $3.00 and fixed costs, $20,000. The operating income expected if the company produces and sells 18,000 units is:

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials price variance is:

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of variable costs for 20,000 units would be:

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The contribution margin expected if the company produces and sells 16,000 units is:

Georgia, Inc. has collected the following data on one of its products. The direct materials quantity variance is:

Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of fixed costs for 20,000 units would be:

Georgia, Inc. has collected the following data on one of its products. The actual cost of direct materials used is:

Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?

Which department is often responsible for the direct materials price variance?

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is:

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The fixed costs expected if the company produces and sells 16,000 units is:

Based on a predicted level of production and sales of 30,000 units, a company anticipates total contribution margin of $105,000, fixed costs of $40,000, and operating income of $65,000. Based on this information, the budgeted operating income for 28,000 units would be:

A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000. Calculate the expected level of operating income if the company produces and sells 13,000 units.

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of contribution margin for 20,000 units would be:

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. Based on this information, the budgeted amount of operating income for 20,000 units would be: