Deck 9: Flexible Budgets Standard Costs and Variance Analysis

Question 1

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.

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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 3

True

Question 4

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

Question 5

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 6

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 7

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

Question 8

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 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

When the materials price variance is recorded at the time of purchase, raw materials are recorded as inventory at standard cost.

Question 15

Waste on the production line will result in an unfavorable materials price variance.

Question 16

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

Question 17

Material price variances are often isolated at the time materials are purchased, rather than when they are placed into production, to facilitate earlier recognition of variances.

Question 18

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

Question 19

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

Question 20

If activity is higher than expected, total fixed costs should be higher than expected.If activity is lower than expected, total fixed costs should be lower than expected.

Question 21

If demand is insufficient to keep everyone busy and workers are not laid off, an unfavorable (U)variable overhead efficiency variance often will be a result unless managers build excessive inventories.

Question 22

A quantity standard indicates how much of an input should be used to make a unit of product or provide a unit of service.

Question 23

An unfavorable materials quantity variance occurs when the actual quantity used in production is less than the standard quantity allowed for the actual output of the period.

Question 24

If variable manufacturing overhead is applied based on direct labor-hours, it is impossible to have a favorable labor rate variance and unfavorable variable overhead rate variance for the same period.

Question 25

The variable overhead efficiency variance does not actually measure how efficiently variable manufacturing overhead resources were used.

Question 26

The standard price per unit for direct materials should reflect the final, delivered cost of the materials.

Question 27

The standard labor rate per hour should not include any employment taxes.

Question 28

If the actual hourly rate is greater than the standard hourly rate, the labor rate variance is labeled unfavorable (U).

Question 29

When more hours of labor time are necessary to complete a job than the standard allows, the labor efficiency variance is unfavorable.

Question 30

The standard quantity or standard hours allowed refers to the amount of the input that should have been used to produce the actual output of the period.

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

The materials price variance is computed based on the amount of materials purchased during the period.

Question 33

If skilled workers with high hourly rates of pay are given duties that require little skill and call for lower hourly rates of pay, this will result in a favorable labor rate variance.

Question 34

In general, the production manager is responsible for the materials price variance.

Question 35

The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the fixed part of the predetermined overhead rate.

Question 36

The labor rate variance measures the difference between the actual hourly rate and the standard hourly rate, multiplied by the standard hours allowed for the actual output.

Question 37

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 38

The labor efficiency variance is labeled favorable (F)if the actual hours used is less than the standard hours allowed for the actual output.

Question 39

The variable overhead efficiency variance measures the difference between the actual level of activity and the standard activity allowed for the actual output, multiplied by the variable part of the predetermined overhead rate.

Question 40

If demand is insufficient to keep everyone busy and workers are not laid off, a favorable (F)labor efficiency variance often will be a result.

Question 41

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 42

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 43

The production department should generally be responsible for materials price variances that resulted from:

A)purchases made in uneconomical lot-sizes.
B)rush orders arising from poor scheduling.
C)purchase of the wrong grade of materials.
D)changes in the market prices of raw materials.

Question 44

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 45

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 46

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 47

An unfavorable materials quantity variance indicates that:

A)actual usage of material exceeds the standard material allowed for output.
B)standard material allowed for output exceeds the actual usage of material.
C)actual material price exceeds standard price.
D)standard material price exceeds actual price.

Question 48

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 49

Variable manufacturing overhead is applied to products on the basis of standard direct labor-hours.If the labor efficiency variance is favorable, the variable overhead efficiency variance will be:

A)favorable.
B)unfavorable.
C)zero.
D)either favorable or unfavorable.

Question 50

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 51

If variable manufacturing overhead is applied on the basis of direct labor-hours and the variable overhead rate variance is favorable, then:

A)the actual variable overhead rate exceeded the standard rate.
B)the standard variable overhead rate exceeded the actual rate.
C)the actual direct labor-hours exceeded the standard direct labor-hours allowed for the actual output.
D)the standard direct labor-hours allowed for the actual output exceeded the actual hours.

Question 52

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 53

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 54

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 55

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 56

A favorable labor rate variance indicates that

A)actual hours exceed standard hours.
B)standard hours exceed actual hours.
C)the actual rate exceeds the standard rate.
D)the standard rate exceeds the actual rate.

Question 57

Poorly trained workers could have an unfavorable effect on which of the following variances?

Question 58

The general model for calculating a quantity variance is:

A)Actual quantity of inputs used × (Actual price - Standard price).
B)Standard price × (Actual quantity of inputs used - Standard quantity allowed for output).
C)(Actual quantity of inputs used × Actual price)- (Standard quantity allowed for output × Standard price).
D)Actual price × (Actual quantity of inputs used - Standard quantity allowed for output).

Question 59

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 60

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 61

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 62

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 63

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 F.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 64

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 65

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 66

Dunbar Footwear Corporation's flexible budget cost formula for supplies, a variable cost, is $2.67 per unit of output.Last month the company had a $9,604 favorable spending variance for supplies.During that month, 19,600 units were produced.Budgeted activity for the month had been 19,200 units.The actual cost per unit for indirect materials must have been closest to:

A)$1.73
B)$2.67
C)$2.18
D)$1.69

Question 67

Last month, Birkner Corporation's actual indirect materials cost, a variable cost, was $30,444 and 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 68

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 69

Aultz Tile Installation Corporation measures its activity in terms of square feet of tile installed.Last month, the budgeted level of activity was 1,180 square feet and the actual level of activity was 1,270 square feet.The company's owner budgets for supply costs, a variable cost, at $3.50 per square foot.The actual supply cost last month was $4,980.What would have been the spending variance for supply costs?

A)$850 U
B)$535 U
C)$353 U
D)$315 U

Question 70

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 71

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 72

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 73

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 74

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 75

Lightsey Natural Dying Corporation measures its activity in terms of skeins of yarn dyed.Last month, the budgeted level of activity was 14,800 skeins and the actual level of activity was 15,100 skeins.The company's owner budgets for dye costs, a variable cost, at $0.51 per skein.The actual dye cost last month was $8,660.What would have been the spending variance for dye costs?

A)$959 U
B)$172 U
C)$1,112 U
D)$153 U

Question 76

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 77

Wyzard 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 and the actual results of operations for February. When the company prepared its planning budget at the beginning of February, it assumed that 37 containers would have been refurbished.However, 32 containers were actually refurbished during February. The revenue variance in the Revenue and Spending Variances column of a report comparing actual results to the flexible budget for February would have been closest to:

A)$1,800 F
B)$17,200 F
C)$1,800 U
D)$17,200 U

Question 78

Younker 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 and the actual results of operations for April. When the company prepared its planning budget at the beginning of April, it assumed that 31 containers would have been refurbished.However, 34 containers were actually refurbished during April. The spending variance for "Other expenses" for April would have been closest to:

A)$3,203 F
B)$500 F
C)$500 U
D)$3,203 U

Question 79

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 80

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