Deck 10: Flexible Budgets and Standard Costs

Question 1

Corbett Company makes blenders.The budgeted selling price is $35 per blender,the variable rate is $18 per blender and budgeted fixed costs are $32,000 per month.What is the budgeted operating income for 2,000 blenders sold in a month?

A)$34,000
B)$68,000
C)$70,000
D)$2,000

Answer 1

D
Outdoor Creations sells its patio heaters for $300 each.Its variable cost is $220 per heater.Fixed costs are $40,000 per month for volumes up to 1,000 heaters.Above 1,000 heaters,monthly fixed costs are $62,000.

Question 2

In a flexible budget,total fixed costs change as production volume changes.

Answer 2

False

Question 3

.What is the Myer Appliances' budgeted operating income (loss)at a sales level of 2,500 microwave ovens per month?

A)Operating loss of $22,500
B)Operating income of $22,500
C)Operating income of $112,500
D)Operating income of $140,000

Answer 3

A

Question 4

A static budget is a budget prepared for multiple volume levels.

Question 5

Both the static budget and the flexible budget used for performance evaluation are developed before the period of actual production.

Question 6

What is the Myer Appliances' budgeted operating income (loss)at a sales level of 1,900 microwave ovens per month?

A)Operating loss of $4,500
B)Operating loss of $49,500
C)Operating income of $85,500
D)Operating income of $119,000

Question 7

Sunny Dayz sells bottles of sun screen lotion for $8.00 each.Variable costs are $4.50 per bottle,while fixed costs are $42,000 per month for volumes up to 20,000 bottles of lotion and $52,000 per month for volumes above 20,000 bottles of lotion.The flexible budget would reflect monthly operating income for 18,000 bottles of lotion and 23,000 bottles of lotion of what dollar amounts?

A)$102,000 and $38,500,respectively
B)$144,000 and $184,000,respectively
C)$21,000 and $28,500,respectively
D)$132,000 and $11,000,respectively

Question 8

Rockwell Corporation manufactures and sells computer keyboards.The keyboard sells for $55 per unit and its variable costs per unit are $42.Fixed costs are $80,000 per month for sales volumes up to 40,000 keyboards.If more than 40,000 keyboards are sold,the fixed costs will be $110,000.The flexible budget would reflect what monthly operating income for a sales volume of 52,000 keyboards?

A)$566,000
B)$676,000
C)$596,000
D)$2,860,000

Question 9

What is the Outdoor Creations' budgeted operating income at a level of 800 patio heaters per month?

A)$2,000
B)$200,000
C)$24,000
D)$64,000

Question 10

Universal Remotes makes remote controls for home theater systems.The budgeted selling price is $125 per remote control,the variable cost is $112 per remote control and budgeted fixed costs are $110,000 per month.What is the budgeted operating income for 12,000 remote controls sold in a month?

A)$156,000
B)$1,454,000
C)$46,000
D)$1,500,000

Question 11

Which budget is best for managers to use to plan revenues and expenses at different sales volumes?

A)Capital budget
B)Flexible budget
C)Static budget
D)Master budget

Question 12

Which of the following statements regarding static budgets is TRUE?

A)They are designed to estimate revenues only.
B)Managers use them to help plan for uncertainties.
C)They are prepared for a range of activity levels.
D)They are prepared for one level of sales volume.

Question 13

Another name for a static budget is a flexible budget.

Question 14

The flexible budget total cost formula applies only to a specific relevant range.

Question 15

Which of the following is a budget based on a single predicted amount of sales or production?

A)Standard budget
B)Flexible budget
C)Fixed budget
D)Static budget

Question 16

What is the Outdoor Creations' budgeted operating income at a level of 1,300 heaters per month?

A)$42,000
B)$104,000
C)$328,000
D)$64,000

Question 17

Which of the following is TRUE regarding a static budget?

A)A static budget is adjusted for changes in the level of sales activity.
B)A static budget is prepared for only one level of sales activity.
C)A static budget is a budget that stays the same from one period to the next.
D)A static budget is also known as a fixed budget.

Question 18

A graph of a flexible budget formula reflects fixed costs of $30,000 per month and total costs of $90,000 at a volume of 6,000 units.Assuming the relevant range is 1,000 to 12,000 units,the graph would reflect total monthly costs at 10,000 units of what dollar amount?

A)$90,000
B)$130,000
C)$100,000
D)$180,000

Question 19

Flexible budgets are budgets that summarize cost and revenue information for multiple volume levels.

Question 20

A flexible budget variance is the difference between

A)actual results and amounts in the static budget.
B)amounts in the flexible budget and the actual results.
C)amounts in the flexible budget and the static budget.
D)the budgeted amounts for each level of sales in the flexible budget.

Question 21

Tucker Supply sells a unit of its product for $10.00,resulting in a contribution margin of $8.00 per unit.Fixed costs are budgeted at $52,000 per quarter for volumes up to 15,000 units and $78,000 for volumes exceeding 15,000 units.
Prepare the flexible budget for the next quarter for volume levels of 12,000,18,000,and 25,000 units.

Question 22

A favourable budget variance occurs when actual expenses are greater than flexible budget expenses.

Question 23

Assuming that all activity is within the relevant range,a decrease in the activity level in a flexible budget will

A)decrease total fixed costs.
B)decrease the variable cost per unit.
C)decrease total costs.
D)increase the variable cost per unit.

Question 24

The sales volume variance is the difference between the static budget and the flexible budget.

Question 25

SnoGo,Inc. ,produces ergonometric tool used for snow removal.The company's static budget income statement for January follows.It is based on expected sales volume of 11,000 tools.

SnoGo's manufacturing capacity is 12,000 tools.If actual volume exceeds 12,000 tools,the company must expand the plant.In that case,salaries will increase by 10%,depreciation by 15%,and rent by $1,500.Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company,showing output levels of 11,000,12,000 and 13,000 tools.

Question 26

SnoGo,Inc. ,produces ergonometric tool used for snow removal.The company's static budget income statement for January follows.It is based on expected sales volume of 11,000 tools.

SnoGo's manufacturing capacity is 12,000 tools.If actual volume exceeds 12,000 tools,the company must expand the plant.In that case,salaries will increase by 10%,depreciation by 15%,and rent by $1,500.Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company,showing output levels of 11,000,12,000 and 13,000 tools.

Question 27

The ________ variance is the difference between the number of units actually sold and the volume of sales originally planned for.

A)materials price
B)flexible budget
C)sales volume
D)labour efficiency

Question 28

The sales volume variance arises because the number of units actually sold differs from the number of units expected to be sold according to the master budget.

Question 29

SnoGo,Inc. ,produces plastic tray used in cafeterias and for snow sledding.
The company's static budget income statement for January follows.It is based on expected sales volume of 50,000 trays.

SnoGo's manufacturing capacity is 62,500 trays.If actual volume exceeds 62,500 trays,the company must expand the plant.In that case,salaries will increase by 15%,depreciation by 10%,and rent by $275.Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company,showing output levels of 50,000,60,000 and 70,000 trays.

Question 30

Scion Corporation provided the following partially completed monthly flexible budget.
Complete the flexible budget.

Question 31

The sales volume variance is the difference between the static budget and the flexible budget for sales revenue,variable expenses,fixed expenses or operating income.

Question 32

The flexible budget variance arises because the number of units actually sold differs from the static budget units.

Question 33

SnoGo,Inc. ,produces ergonometric tool used for snow removal.The company's static budget income statement for January follows.It is based on expected sales volume of 5,500 tools.

SnoGo's manufacturing capacity is 6,250 tools.If actual volume exceeds 6,250 tools,the company must expand the plant.In that case,salaries will increase by 10%,depreciation by 15%,and rent by $1,500.Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company,showing output levels of 5,500,6,000 and 6,500 tools.

Question 34

The flexible budget variance is the difference between the flexible budget and the static budget.

Question 35

A company's flexible budget for 80,000 units of production showed sales of $240,000;variable costs of $120,000;and fixed costs of $80,000.What net operating income would you expect the company to earn if it produces and sells 83,000 units? (Assume 83,000 units is in the relevant range. )

Question 36

A sales volume variance for units is the difference between the

A)number of units actually sold and number of units expected to be sold according to the static budget.
B)number of units in the flexible budget at two levels of activity.
C)actual units sold and the number of units in the flexible budget.
D)actual sales volume and normal sales volume.

Question 37

The flexible budget used for performance evaluation is based on the budgeted number of outputs.

Question 38

The difference between actual costs and the costs that should have been incurred for the actual number of outputs is called the

A)flexible budget variance.
B)price variance.
C)static budget variance.
D)sales volume variance.

Question 39

SnoGo,Inc. ,produces plastic tray used in cafeterias and for snow sledding.
The company's static budget income statement for January follows.It is based on expected sales volume of 5,500 trays.

SnoGo's manufacturing capacity is 6,250 trays.If actual volume exceeds 6,250 trays,the company must expand the plant.In that case,salaries will increase by 10%,depreciation by 15%,and rent by $800.Fixed utilities will be unchanged by any volume increase.
Prepare flexible budget income statements for the company,showing output levels of 5,500,6,000 and 6,500 trays.

Question 40

What is the Kid Adventures Company's sales volume variance for operating income?

A)$17,700 unfavourable
B)$76,400 unfavourable
C)$17,700 favourable
D)$76,400 favourable

Question 41

Which budget is based on the expected number of sales?

A)Flexible budget used for evaluating performance
B)Operating budget
C)Output budget
D)Static budget

Question 42

What is the Kid Adventures Company's flexible budget variance for total expenses?

A)$25,700 unfavourable
B)$29,700 unfavourable
C)$25,700 favourable
D)$29,700 favourable

Question 43

What is the Zany Brainy's sales volume variance for operating income?

A)$30,000 favourable
B)$65,000 unfavourable
C)$65,000 favourable
D)$30,000 unfavourable

Question 44

The Bird Brainz Corporation produces and sells two types of bird cages,deluxe and regular.The Bird Brainz Corporation provides the following data:

Compute the flexible budget variance and the sales volume variance for sales revenue for deluxe and regular bird cages.

Question 45

On the line at the end of each sentence,put the letter of the phrase that best completes the
sentence.
A.Actual number of outputs
B.Expected number of outputs
C.Sales volume variance
D.Beginning of the period
E.End of the period
F.Flexible budget variance
G.Static budget variance
1.The flexible budget used in an income statement performance report is based on the ________.
2.The master budget is based on the ________.
3.The difference between actual costs and the costs that should have been incurred for the actual number of outputs is the ________.
4.The flexible budget used in an income statement performance report is developed at the ________.
5.The static budget is developed at the ________.

Question 46

Which term below is best paired with "a budget for a single unit"?

A)Static budget
B)Standard cost
C)Overhead flexible budget variance
D)Production volume variance

Question 47

What is the Zany Brainy's flexible budget variance for operating income?

A)$65,000 favourable
B)$65,000 unfavourable
C)$35,000 unfavourable
D)$35,000 favourable

Question 48

What is the Zany Brainy's flexible budget variance for variable expenses?

A)$55,000 favourable
B)$50,000 favourable
C)$55,000 unfavourable
D)$50,000 unfavourable

Question 49

A.C.Catering reported actual operating income for the current year of $40,000.The flexible budget's operating income for actual volume achieved is $38,000,while the static budget's operating income is $35,000.What is the flexible budget variance for operating income?

A)$2,000 favourable
B)$5,000 favourable
C)$5,000 unfavourable
D)$2,000 unfavourable

Question 50

What is the Zany Brainy's flexible budget variance for total expenses?

A)$55,000 unfavourable
B)$75,000 unfavourable
C)$55,000 favourable
D)$75,000 favourable

Question 51

What is the Kid Adventures Company's flexible budget variance for variable expenses?

A)$32,400 favourable
B)$29,700 unfavourable
C)$32,400 unfavourable
D)$29,700 favourable

Question 52

Which term below is best paired with "arises when actual production volume differs from expected production volume"?

A)Static budget
B)Standard budget
C)Overhead flexible budget variance
D)Production volume variance

Question 53

What is the Kid Adventures Company's flexible budget variance for operating income?

A)$58,700 favourable
B)$76,400 unfavourable
C)$76,400 favourable
D)$58,700 unfavourable

Question 54

The Flashlight Company projected yearly sales of 12,000 units at $15.00 per unit.Actual sales for the year were 15,000 units at $16.00 per unit.Variable expenses,budgeted at $10.00 per unit,actually amounted to $15.00 per unit.Fixed expenses,budgeted at $50,000,actually totaled $48,000.
Prepare the Flashlight Company's income statement performance report for the year ended December 31,including both flexible budget variances and sales volume variances.

Question 55

What is the Zany Brainy's sales volume variance for total revenue?

A)$110,000 favourable
B)$100,000 unfavourable
C)$110,000 unfavourable
D)$100,000 favourable

Question 56

Dambrodt Travel Agency's actual operating income for the current year is $25,000.The flexible budget's operating income for actual volume achieved is $32,000,while the static budget's operating income is $35,000.What is the sales volume variance for operating income?

A)$7,000 unfavourable
B)$3,000 favourable
C)$3,000 unfavourable
D)$7,000 favourable

Question 57

What is the Kid Adventures Company's sales volume variance for total revenue?

A)$64,500 favourable
B)$64,500 unfavourable
C)$67,500 favourable
D)$67,500 unfavourable

Question 58

Breezy Fan Company manufactures ceiling fans Breezy Fan estimated yearly sales of 20,000 units at $16 per unit.Actual sales for the year were 23,000 units at $17 per unit.Variable expenses were budgeted at $6 per unit,and actual variable expenses were $6.20 per unit.Actual fixed costs were $78,400,and budgeted fixed costs were $75,000.
Prepare Breezy Fan's income statement performance report,including flexible budget variances and sales volume variances,for the year ended December 31.

Question 59

Tuff Stuff Company's managers received the following incomplete performance report:

Find the missing data by completing the performance report.Identify the employee group that may deserve praise and the group that may be subject to criticism.Give your reasons.

Question 60

Wolanin Corporation,which manufactures straw hats,is developing direct labour standards.The basic direct labour rate is $20.00 per hour.Payroll taxes are 15% of the basic direct labour rate,while fringe benefits such as vacation and health care insurance,are $5.00 per hour.What is the standard rate per direct labour hour?

A)$28.00
B)$20.00
C)$25.00
D)$23.00

Question 61

Handco has a relevant range extending to 60,000 units each month.The following performance
report provides information about Handco's budget and actual performance for April.

Required:
Find the missing data for letters A-G.Be sure to label any variances as favourable or unfavourable

Question 62

A sales volume variance will occur when the number of units actually sold differs from the volume originally planned for in the master budget.

Question 63

Nadia Corporation,which manufactures straw hats,is developing direct labour standards.The basic direct labour rate is $10.00 per hour.Payroll taxes are 12% of the basic direct labour rate,while fringe benefits such as vacation and health care insurance,are $4.00 per hour.What is the standard rate per direct labour hour?

A)$15.20
B)$10.00
C)$14.00
D)$11.20

Question 64

Linkin Co.has a relevant range extending to 20,000 units each month.The following performance
report provides information about Linkin Co.'s budget and actual performance for April.

Required:
Find the missing data for letters A-G.Be sure to label any variances as favourable or unfavourable

Question 65

A standard cost for production inputs is a carefully predetermined cost that usually is expressed on a per-unit basis.

Question 66

The standard for the direct labour rate per hour includes fringe benefits such as health care insurance and vacations.

Question 67

Tuff Stuff Company's managers received the following incomplete performance report:

Find the missing data by completing the performance report.Identify the employee group that may deserve praise and the group that may be subject to criticism.Give your reasons.

Question 68

Identify five benefits of standard costs.

Question 69

Standard costs for production inputs are used to develop flexible budgets.

Question 70

Which of the following is a carefully predetermined cost that is usually expressed on a per unit basis?

A)Allocated cost
B)Applied cost
C)Flexible cost
D)Standard cost

Question 71

Bug Off Corporation,which produces citronella candles,is developing direct material standards.Each candle requires 0.65 kilograms of wax.The allowance for waste is 0.04 kilograms per candle,while the allowance for rejects is 0.07 kilograms per candle.What is the standard quantity of wax per candle?

A)0.72 kilograms
B)0.65 kilograms
C)0.69 kilograms.
D)0.76 kilograms

Question 72

Handco has a relevant range extending to 60,000 units each month.The following performance report provides information about Handco's budget and actual performance for April.

Required:
Find the missing data for letters A-G.Be sure to label any variances as favourable or unfavourable

Question 73

Standard costs for production inputs help motivate employees by serving as benchmarks against which their performance is measured.

Question 74

Tuff Stuff Company's managers received the following incomplete performance report:

Find the missing data by completing the performance report.Identify the employee group that may deserve praise and the group that may be subject to criticism.Give your reasons.

Question 75

Blackwell Manufacturing,which produces flip-flops,is developing direct material standards.Each flip-flop requires 0.52 kilograms of a special foam.The allowance for waste is 0.03 kilograms per flip-flop,while the allowance for rejects is 0.02 kilograms per flip-flop.What is the standard quantity of foam per flip-flop?

A)0.52 kilograms
B)0.54 kilograms
C)0.57 kilograms
D)0.55 kilograms

Question 76

The price sensitivity of consumers can be studied using standard costing.

Question 77

Linkin Co.has a relevant range extending to 50,000 units each month.The following performance
report provides information about Linkin Co.'s budget and actual performance for April.

Required:
Find the missing data for letters A-G.Be sure to label any variances as favourable or unfavourable

Question 78

Tuff Stuff Company's managers received the following incomplete performance report:

Find the missing data by completing the performance report.Identify the employee group that may deserve praise and the group that may be subject to criticism.Give your reasons.

Question 79

Raw material,ruined through mistakes during production,will result in a materials price variance.

Question 80

Good Roast roasts,grinds and bags of organic coffee beans sold at specialty grocery stores.Good roast allocates manufacturing overhead based on direct labour hours.Good Roast has projected total overhead for the year to be $960,000.Of this amount,$640,000 relates to fixed overhead expenses.Good Roast expects to process 160,000 cases of organic coffee this year.The direct labour standard for each case is 30 minutes.
Required:
1.Compute the standard variable overhead rate.
2.Compute the fixed overhead rate.
3.Compute the standard total overhead rate.