Deck 9: Flexible Budgets and Performance Analysis

Question 1

To help assess how well a manager has controlled costs, actual costs should be compared to what the costs should have been for the actual level of activity.

Answer 1

True

Question 2

Comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control.

Answer 2

True

Question 3

The activity variance for revenue is favorable if the revenue in the flexible budget exceeds the revenue in the static planning budget.

Answer 3

True

Question 4

An unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed.

Question 5

The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity.

Question 6

Using a flexible budget, actual results can be compared to what costs should have been at the actual level of activity.

Question 7

A revenue variance is the difference between what the total sales revenue should be, given the actual level of activity of the period, and the actual total sales revenue.

Question 8

Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes.

Question 9

A revenue variance is unfavorable if the revenue in the static planning budget is less than the revenue in the flexible budget.

Question 10

A favorable spending variance occurs when the actual cost is less than the amount of the cost in the static planning budget.

Question 11

Differences between the static planning budget and the flexible budget show what should have happened because the actual level of activity differed from what had been planned.

Question 12

When the activity measure is the number of units sold, the revenue variance is favorable if the average actual selling price is greater than expected.

Question 13

A revenue variance is favorable if the actual revenue is greater than the revenue in the static planning budget.

Question 14

Fixed costs should not be ignored when evaluating how well a manager has controlled costs.

Question 15

In a flexible budget, when the activity declines, the total variable cost also declines.

Question 16

The activity variance for revenue is favorable if the actual revenue for the period exceeds the revenue in the static planning budget.

Question 17

An activity variance is the difference between an actual revenue or cost and the revenue or cost in the flexible budget that is adjusted for the actual level of activity of the period.

Question 18

Actual costs are determined by plugging the actual level of activity for the period into the cost formulas used in flexible budgets.

Question 19

A spending variance is the difference between the amount of the cost in the static planning budget and the amount of the cost in the flexible budget.

Question 20

Fixed costs should usually be included in performance reports because fixed costs are generally controllable.

Question 21

The activity variance for expenses in October would be:

A) $5,095 F
B) $15,700 F
C) $5,095 U
D) $15,700 U

Question 22

Which of the following may appear on a flexible budget performance report?

A) An unfavorable activity variance.
B) A favorable revenue variance.
C) An unfavorable spending variance.
D) All of the above may appear on a flexible budget performance report.

Question 23

Buckson Framing's cost formula for its supplies cost is $1,350 per month plus $18 per frame. For the month of June, the company planned for activity of 716 frames, but the actual level of activity was 713 frames. The actual supplies cost for the month was $14,820. The supplies cost in the flexible budget for June would be closest to:

A) $14,820
B) $14,184
C) $14,178
D) $14,238

Question 24

The overall revenue and spending variance (i.e., the variance for net operating income in the revenue and spending variance column on the flexible budget performance report) for October would be:

A) $38,200 F
B) $33,815 F
C) $38,200 U
D) $33,815 U

Question 25

A flexible budget report should exclude variable costs because they can be expected to change with a change in the level of activity.

Question 26

Sathre Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of December, it assumed that 34 wells would have been serviced. However, 32 wells were actually serviced during December.The "Employee salaries and wages" in the flexible budget for December would have been closest to:

A) $87,000
B) $84,600
C) $85,200
D) $89,888

Question 27

Mongelli 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 99 guests?

A) $7,793.90
B) $61,541.00
C) $8,512.90
D) $7,739.00

Question 28

The activity variance for revenue in October would be:

A) $22,500 F
B) $9,480 F
C) $22,500 U
D) $9,480 U

Question 29

A flexible budget performance report with more than one cost driver can contain activity variances but not revenue or spending variances due to the increased complexity.

Question 30

A budget that is based on the actual activity of a period is known as a:

A) continuous budget.
B) flexible budget.
C) static budget.
D) master budget.

Question 31

In a flexible budget, what will happen to fixed costs as the activity level increases?

A) The fixed cost per unit will decrease.
B) The fixed cost per unit will remain unchanged.
C) The fixed cost per unit will increase.
D) Fixed costs are not included in a flexible budget.

Question 32

Performance reports with more than one cost driver typically have more accurate variances than those based on one cost driver.

A) $(35,960)
B) $(2,145)
C) $2,240
D) $7,850

Question 33

Cosden Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of May, it assumed that 29 wells would have been serviced. However, 31 wells were actually serviced during May.The total expenses in the flexible budget for May would have been closest to:

A) $133,100
B) $124,513
C) $127,900
D) $131,100

Question 34

The net operating income (loss) in the flexible budget for October would be:

A) $(35,960)
B) $(2,145)
C) $2,240
D) $7,850

Question 35

A flexible budget performance report with more than one cost driver will always have more unfavorable revenue and spending variances than a performance report with only one cost driver.

Question 36

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

A) $38,200 F
B) $33,815 F
C) $38,200 U
D) $33,815 U

Question 37

Herlocker Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of February, it assumed that 26 containers would have been refurbished.The amount shown for revenue in the planning budget for February would have been closest to:

A) $136,300
B) $119,600
C) $133,400
D) $122,200

Question 38

A flexible budget performance report contains activity variances but not revenue or spending variances.

Question 39

When using a flexible budget, a decrease in activity within the relevant range:

A) decreases variable cost per unit.
B) increases variable cost per unit.
C) decreases total costs.
D) increases total costs.

Question 40

Flexible budgets can be used when there is more than one cost driver (i.e., measure of activity).

Question 41

Bonavita Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of July, it assumed that 33 customers would have been served.The amount shown for net operating income in the planning budget for July would have been closest to:

A) ($4,300)
B) ($1,414)
C) ($1,200)
D) $8,200

Question 42

Picozzi Snow Removal's cost formula for its vehicle operating cost is $2,060 per month plus $306 per snow-day. For the month of January, the company planned for activity of 16 snow-days, but the actual level of activity was 18 snow-days. The actual vehicle operating cost for the month was $7,720. The vehicle operating cost in the planning budget for January would be closest to:

A) $6,956
B) $6,862
C) $7,720
D) $7,568

Question 43

Cardero Midwifery's cost formula for its wages and salaries is $2,280 per month plus $348 per birth. For the month of August, the company planned for activity of 118 births, but the actual level of activity was 116 births. The actual wages and salaries for the month was $44,120. The wages and salaries in the planning budget for August would be closest to:

A) $44,881
B) $44,120
C) $43,344
D) $42,648

Question 44

Sherburne Snow Removal's cost formula for its vehicle operating cost is $2,510 per month plus $371 per snow-day. For the month of March, the company planned for activity of 18 snow-days, but the actual level of activity was 17 snow-days. The actual vehicle operating cost for the month was $8,460. The vehicle operating cost in the flexible budget for March would be closest to:

A) $8,817
B) $9,188
C) $8,460
D) $8,678

Question 45

Barsness Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for November. When the company prepared its planning budget at the beginning of November, it assumed that 39 wells would have been serviced. However, 43 wells were actually serviced during November.The amount shown for "Other expenses" in the planning budget for November would have been closest to:

A) $34,800
B) $35,300
C) $32,016
D) $35,050

Question 46

Magliacane Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of February, it assumed that 39 customers would have been served. However, 35 customers were actually served during February.The revenue in the company's flexible budget for February would have been closest to:

A) $170,709
B) $167,700
C) $153,200
D) $150,500

Question 47

Thilking Midwifery's cost formula for its wages and salaries is $2,140 per month plus $454 per birth. For the month of August, the company planned for activity of 102 births, but the actual level of activity was 100 births. The actual wages and salaries for the month was $47,660. The wages and salaries in the flexible budget for August would be closest to:

A) $47,540
B) $48,448
C) $47,498
D) $47,660

Question 48

Wember 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 $550 per month plus $77 per job plus $13 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 September to be 18 jobs and 148 meals, but the actual activity was 14 jobs and 145 meals. The actual cost for catering supplies in September was $3,340. The catering supplies in the planning budget for September would be closest to:

A) $3,890
B) $3,860
C) $3,340
D) $3,513

Question 49

Kerekes 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 2,400 machine-hours rather than 2,500 machine-hours?

A) $59,830
B) $59,280
C) $60,380
D) $61,750

Question 50

Bugos Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of March, it assumed that 40 customers would have been served.The amount shown for "Employee salaries and wages" in the planning budget for March would have been closest to:

A) $91,200
B) $94,800
C) $92,600
D) $102,889

Question 51

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 Favorable. 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):

A) $0.20
B) $0.25
C) $0.30
D) $0.35

Question 52

Loughry 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 $530 per month plus $114 per job plus $16 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 25 jobs and 234 meals, but the actual activity was 20 jobs and 233 meals. The actual cost for catering supplies in October was $6,600. The catering supplies in the flexible budget for October would be closest to:

A) $6,600
B) $5,699
C) $6,538
D) $7,124

Question 53

Sharifi Hospital bases its budgets on patient-visits. The hospital's static budget for October appears below: The total overhead cost at an activity level of 7,700 patient-visits per month should be:

A) $245,850
B) $237,170
C) $232,180
D) $223,500

Question 54

Dreckman Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for August. When the company prepared its planning budget at the beginning of August, it assumed that 36 customers would have been served. However, 31 customers were actually served during August.The "Other expenses" in the flexible budget for August would have been closest to:

A) $33,500
B) $38,903
C) $28,847
D) $33,100

Question 55

Sharifi Hospital bases its budgets on patient-visits. The hospital's static budget for October appears below: The total overhead cost at an activity level of 9,200 patient-visits per month should be:

A) $260,360
B) $250,070
C) $249,300
D) $240,550

Question 56

Kirkeby Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of May, it assumed that 32 containers would have been refurbished. However, 34 containers were actually refurbished during May.The "Refurbishing materials" in the flexible budget for May would have been closest to:

A) $22,682
B) $24,100
C) $22,400
D) $23,800

Question 57

Faulks Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of August, it assumed that 23 containers would have been refurbished. However, 26 containers were actually refurbished during August.The amount shown for total expenses in the planning budget for August would have been closest to:

A) $111,904
B) $126,500
C) $122,400
D) $128,100

Question 58

Ostler Hotel bases its budgets on guest-days. The hotel's static budget for April appears below: The total overhead cost at an activity level of 9,700 guest-days per month should be:

A) $213,150
B) $237,650
C) $223,950
D) $224,920

Question 59

Hamiter Framing's cost formula for its supplies cost is $1,640 per month plus $9 per frame. For the month of August, the company planned for activity of 572 frames, but the actual level of activity was 573 frames. The actual supplies cost for the month was $7,080. The supplies cost in the planning budget for August would be closest to:

A) $7,080
B) $7,068
C) $6,788
D) $6,797

Question 60

Kerekes 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 2,700 machine-hours rather than 2,800 machine-hours?

A) $65,230
B) $64,800
C) $65,850
D) $67,200

Question 61

Birkner Corporation's flexible budget performance report for last month shows that actual indirect materials cost, a variable cost, was $30,444 and that the spending variance for indirect materials cost was $8,142 favorable. During that month, the company worked 17,700 machine-hours. Budgeted activity for the month had been 18,200 machine-hours. The cost formula per machine-hour for indirect materials cost must have been closest to:

A) $1.23
B) $1.26
C) $2.12
D) $2.18

Question 62

Wember 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 $400 per month plus $82 per job plus $10 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 September to be 20 jobs and 144 meals, but the actual activity was 16 jobs and 141 meals. The actual cost for catering supplies in September was $3,100. The catering supplies in the planning budget for September would be closest to:

A) $3,875
B) $3,480
C) $3,100
D) $3,122

Question 63

Ekholm Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of December, it assumed that 30 containers would have been refurbished. However, 35 containers were actually refurbished during December.The activity variance for "Employee salaries and wages" for December would have been closest to:

A) $5,000 U
B) $5,000 F
C) $4,000 U
D) $4,000 F

Question 64

Bade Midwifery's cost formula for its wages and salaries is $1,220 per month plus $246 per birth. For the month of October, the company planned for activity of 106 births, but the actual level of activity was 102 births. The actual wages and salaries for the month was $27,250. The activity variance for wages and salaries in October would be closest to:

A) $46 U
B) $984 F
C) $984 U
D) $46 F

Question 65

Pattison Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of May, it assumed that 20 customers would have been served. However, 17 customers were actually served during May.The activity variance for "Travel expenses" for May would have been closest to:

A) $1,500 U
B) $1,500 F
C) $2,000 F
D) $2,000 U

Question 66

Groupe 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 $48,840 per month plus $2,381 per flight plus $7 per passenger. The company expected its activity in October to be 63 flights and 293 passengers, but the actual activity was 61 flights and 298 passengers. The actual cost for plane operating costs in October was $199,070. The activity variance for plane operating costs in October would be closest to:

A) $1,824 F
B) $1,824 U
C) $4,727 U
D) $4,727 F

Question 67

Rudick Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of July, it assumed that 34 wells would have been serviced. However, 36 wells were actually serviced during July.The activity variance for revenue for July would have been closest to:

A) $10,800 U
B) $9,000 F
C) $9,000 U
D) $10,800 F

Question 68

Dermody Snow Removal's cost formula for its vehicle operating cost is $2,850 per month plus $317 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $7,640. The spending variance for vehicle operating cost in December would be closest to:

A) $282 U
B) $282 F
C) $352 U
D) $352 F

Question 69

Kirnon 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 $300 per month plus $114 per job plus $16 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 27 jobs and 224 meals, but the actual activity was 29 jobs and 227 meals. The actual cost for catering supplies in October was $7,500. The activity variance for catering supplies in October would be closest to:

A) $276 F
B) $276 U
C) $538 U
D) $538 F

Question 70

Pittman Framing's cost formula for its supplies cost is $1,150 per month plus $11 per frame. For the month of November, the company planned for activity of 789 frames, but the actual level of activity was 792 frames. The actual supplies cost for the month was $9,480. The spending variance for supplies cost in November would be closest to:

A) $349 F
B) $382 U
C) $382 F
D) $349 U

Question 71

Tos Corporation's flexible budget cost formula for indirect materials, a variable cost, is $0.60 per unit of output. If the company's performance report for last month shows an $800 unfavorable spending variance for indirect materials and if 9,000 units of output were produced last month, then the actual costs incurred for indirect materials for the month must have been:

A) $5,600
B) $4,600
C) $5,400
D) $6,200

Question 72

Wisseman Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of September, it assumed that 28 containers would have been refurbished. However, 26 containers were actually refurbished during September.The activity variance for total expenses for September would have been closest to:

A) $400 F
B) $400 U
C) $3,000 U
D) $3,000 F

Question 73

Dermody Snow Removal's cost formula for its vehicle operating cost is $3,010 per month plus $331 per snow-day. For the month of December, the company planned for activity of 13 snow-days, but the actual level of activity was 15 snow-days. The actual vehicle operating cost for the month was $7,585. The spending variance for vehicle operating cost in December would be closest to:

A) $272 U
B) $272 F
C) $390 F
D) $390 U

Question 74

Petrus Framing's cost formula for its supplies cost is $1,730 per month plus $11 per frame. For the month of March, the company planned for activity of 613 frames, but the actual level of activity was 618 frames. The actual supplies cost for the month was $8,670. The activity variance for supplies cost in March would be closest to:

A) $197 U
B) $197 F
C) $55 U
D) $55 F

Question 75

Groupe 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 $36,270 per month plus $2,064 per flight plus $1 per passenger. The company expected its activity in October to be 87 flights and 237 passengers, but the actual activity was 86 flights and 242 passengers. The actual cost for plane operating costs in October was $211,010. The activity variance for plane operating costs in October would be closest to:

A) $2,059 U
B) $5,065 F
C) $2,059 F
D) $5,065 U

Question 76

Pittman Framing's cost formula for its supplies cost is $1,040 per month plus $14 per frame. For the month of November, the company planned for activity of 614 frames, but the actual level of activity was 604 frames. The actual supplies cost for the month was $9,200. The spending variance for supplies cost in November would be closest to:

A) $296 U
B) $436 U
C) $296 F
D) $436 F

Question 77

Petrus Framing's cost formula for its supplies cost is $2,300 per month plus $6 per frame. For the month of March, the company planned for activity of 861 frames, but the actual level of activity was 856 frames. The actual supplies cost for the month was $7,790. The activity variance for supplies cost in March would be closest to:

A) $324 U
B) $30 F
C) $324 F
D) $30 U

Question 78

Taussig Snow Removal's cost formula for its vehicle operating cost is $1,880 per month plus $394 per snow-day. For the month of February, the company planned for activity of 13 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $7,250. The activity variance for vehicle operating cost in February would be closest to:

A) $394 F
B) $248 U
C) $394 U
D) $248 F

Question 79

Scharfenberg Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for March. When the company prepared its planning budget at the beginning of March, it assumed that 23 wells would have been serviced. However, 25 wells were actually serviced during March.The activity variance for "Other expenses" for March would have been closest to:

A) $0
B) $200 F
C) $2,712 F
D) $200 U

Question 80

Bade Midwifery's cost formula for its wages and salaries is $1,250 per month plus $244 per birth. For the month of October, the company planned for activity of 105 births, but the actual level of activity was 101 births. The actual wages and salaries for the month was $26,915. The activity variance for wages and salaries in October would be closest to:

A) $45 U
B) $976 F
C) $976 U
D) $45 F