Deck 10: Flexible Budgets and Standard Costs

Question 1

On the line in front of each statement,enter the letter corresponding to the term that best fits that statement.An item may be used more than once or not at all.

A)Sales volume variance
B)Efficiency variance
C)Flexible budget
D)Benchmarking
E)Overhead flexible budget variance
____ The difference between the actual quantity of input and standard quantity of input
Allowed for actual output,multiplied by the standard unit price of input
____ Using standards based on the "best practice" level of performance
____ A summarized budget that can easily be computed for several volume levels
____ The difference between the actual overhead cost incurred and the flexible budget amount of overhead cost for actual production
____ Arises because the number of units actually sold differs from the static budget units

Answer 1

B__ The difference between the actual quantity of input and standard quantity of input allowed for actual output, multiplied by the standard unit price of input
D__ Using standards based on the “best practice” level of performance
C__ A summarized budget that can easily be computed for several volume levels
E__ The difference between the actual overhead cost incurred and the flexible budget amount of overhead cost for actual production
A__ Arises because the number of units actually sold differs from the static budget units

Question 2

1-9 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

Answer 2

D

Question 3

1-18 Myer Appliances sells its microwave ovens for $110 each.Its variable cost is $65 per microwave oven.Fixed costs are $90,000 per month for volumes up to 2,000 microwave ovens.Above 2,000 microwave ovens,monthly fixed costs are $135,000.What is the 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

Answer 3

A

Question 4

1-17 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 5

1-6 Both the static budget and the flexible budget used for performance evaluation are developed before the period of actual production.

Question 6

1-8 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 7

1-14 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.What is the 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 8

1-1 A static budget is a budget prepared for multiple volume levels.

Question 9

1-19 Myer Appliances sells its microwave ovens for $110 each.Its variable cost is $65 per microwave oven.Fixed costs are $90,000 per month for volumes up to 2,000 microwave ovens.Above 2,000 microwave ovens,monthly fixed costs are $135,000.What is the 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

Question 10

1-13 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

Question 11

1-10 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 12

1-15 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 patio heaters.Above 1,000 heaters,monthly fixed costs are $62,000.What is the 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 13

1-11 Sunny Dayz sells bottles of sunscreen 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 14

1-4 The flexible budget total cost formula applies ONLY to a specific relevant range.

Question 15

1-2 Another name for a static budget is a flexible budget.

Question 16

1-12 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 17

1-5 Flexible budgets are budgets that summarize cost and revenue information for multiple volume levels.

Question 18

1-3 In a flexible budget,total fixed costs change as production volume changes.

Question 19

1-7 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 20

1-16 Universal Remotes makes remote controls for home theater systems.The budgeted selling price is $125 per remote control,the variable rate 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 21

Match each of the following terms to the definitions below by entering the letter of the term on the line in front of the definition.
A.Flexible budget
B.Flexible budget variance
C.Static budget
D.Variance
E.Sales volume variance
____ The difference arising only because the number of units actually sold differs form the static budget units
____ The difference arising because the company actually earned more or less revenue,or
incurred more or less cost,than expected for the actual level of output
____ The budget prepared for only one level of sales volume
____ The difference between an actual amount and the budget
____ A summarized budget for several levels of volume that separates variable costs from fixed costs

Question 22

2-1 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 23

2-14 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 24

On the line in front of each statement,enter the letter corresponding to the term that best fits
that statement.An item may be used more than once or not at all.
A.Price variance
B.Production volume variance
C.Flexible budget variance
D.Standard cost
E.Variance
____ The difference between an actual result and a flexible budget amount for the actual output
____ The difference between an actual amount and the corresponding budgeted amount
____ The difference between the actual and standard unit price of input,multiplied by the actual quantity of input
____ The difference between the overhead cost in the flexible budget for actual production and the standard overhead cost allocated to production
____ A carefully predetermined cost that usually is expressed on a per unit basis

Question 25

2-8 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)labor efficiency

Question 26

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 27

2-13 What do flexible budgets help to measure?

A)The efficiency of operations at the actual activity levels
B)The amount by which standard and expected prices differ
C)Both A and B
D)None of the above

Question 28

2-5 A favorable budget variance occurs when actual expenses are greater than flexible budget
expenses.

Question 29

1-24 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 30

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

Question 31

2-7 The sales volume variance is the difference between the static budget and the flexible budget.

Question 32

2-3 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 33

2-10 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 34

2-2 The flexible budget variance arises because the number of units actually sold differs from the static budget units.

Question 35

2-4 The flexible budget used for performance evaluation is based on the budgeted number of outputs.

Question 36

2-11 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 37

2-12 Which of the following is NOT a possible reason for a flexible budget variance between flexible budget amounts and actual results?

A)The amount of labor used per unit of output was different than expected.
B)The actual volume of sales was different than expected.
C)Material prices per unit of output were different than expected.
D)None of the above is a possible reason for a variance.

Question 38

2-6 The flexible budget variance is the difference between the flexible budget and the static budget.

Question 39

2-9 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 40

2-15 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 41

Zany Brainy projected current year sales of 50,000 units at a unit sale price of $20.00.Actual current year sales were 55,000 units at $22.00 per unit.Actual variable costs,budgeted at $14.00 per unit,totaled $15.00 per unit.Budgeted fixed costs totaled $400,000 while actual fixed costs amounted to $420,000.

- What is the flexible budget variance for total expenses?

A)$55,000 unfavorable
B)$75,000 unfavorable
C)$55,000 favorable
D)$75,000 favorable

Question 42

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.Actual variable expenses,budgeted at $12.00 per unit,amounted to $10.00 per unit.Actual fixed expenses,budgeted at $50,000,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 43

The Bird Brainz Corporation produces and sells two types of bird cages,deluxe and regular.The Bird Brainz Corporation provides the following data:
$$\begin{array} { | l | r | r | } \hline & \text { Budget } & \text { Actual } \\\hline & & \\\text { Deluze cage - selling price } & \$ 110.00 & \$ 105.00 \\\hline \text { Regular cage - selling price } & \$ 52.00 & \$ 49.00 \\\hline \text { Delure cage - sales in urits } & 25 & 27 \\\hline \text { Regular cage - sales in urits } & 110 & 98 \\\hline\end{array}$$ Compute the flexible budget variance and the sales volume variance for sales revenue for deluxe and regular bird cages.

Question 44

Match each of the following terms to the definitions below by entering the letter of the term on the line in front of the definition.

A)Static budget
B)Standard cost
C)Overhead flexible budget variance
D)Production volume variance
____ A budget for a single unit
____ Using standards based on "best practice"
____ Arises when actual production volume differs from expected production volume

Question 45

Kid Adventures Company projected current year sales of 3,600 swing sets at a unit sale price of $225.00.Actual current year sales were 3,300 units at $215.00 per unit.Actual variable costs,budgeted at $166.00 per unit,totaled $175.00 per unit.Budgeted fixed costs totaled $122,000 while actual fixed costs amounted to $118,000.

-What is the flexible budget variance for variable expenses?

A)$32,400 favorable
B)$29,700 unfavorable
C)$32,400 unfavorable
D)$29,700 favorable

Question 46

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 47

Zany Brainy projected current year sales of 50,000 units at a unit sale price of $20.00.Actual current year sales were 55,000 units at $22.00 per unit.Actual variable costs,budgeted at $15.00 per unit,totaled $14.00 per unit.Budgeted fixed costs totaled $400,000,while actual fixed costs amounted to $420,000.

-What is the sales volume variance for total revenue?

A)$110,000 favorable
B)$100,000 unfavorable
C)$110,000 unfavorable
D)$100,000 favorable

Question 48

Zany Brainy projected current year sales of 50,000 units at a unit sale price of $20.00.Actual current year sales were 55,000 units at $22.00 per unit.Actual variable costs,budgeted at $14.00 per unit,totaled $15.00 per unit.Budgeted fixed costs totaled $400,000 while actual fixed costs amounted to $420,000.

-What is the sales volume variance for operating income?

A)$30,000 favorable
B)$65,000 unfavorable
C)$65,000 favorable
D)$30,000 unfavorable

Question 49

Kid Adventures Company projected current year sales of 3,600 swing sets at a unit sale price of $225.00.Actual current year sales were 3,300 units at $215.00 per unit.Actual variable costs,budgeted at $166.00 per unit,totaled $175.00 per unit.Budgeted fixed costs totaled $122,000,while actual fixed costs amounted to $118,000.

-What is the sales volume variance for total revenue?

A)$64,500 favorable
B)$64,500 unfavorable
C)$67,500 favorable
D)$67,500 unfavorable

Question 50

Kid Adventures Company projected current year sales of 3,600 swing sets at a unit sale price of $225.00.Actual current year sales were 3,300 units at $215.00 per unit.Actual variable costs,budgeted at $166.00 per unit,totaled $175.00 per unit.Budgeted fixed costs totaled $122,000 while actual fixed costs amounted to $118,000.

-What is the sales volume variance for operating income?

A)$17,700 unfavorable
B)$76,400 unfavorable
C)$17,700 favorable
D)$76,400 favorable

Question 51

3-1 A standard cost for production inputs is a carefully predetermined cost that usually is expressed on a per-unit basis.

Question 52

Kid Adventures Company projected current year sales of 3,600 swing sets at a unit sale price of $225.00.Actual current year sales were 3,300 units at $215.00 per unit.Actual variable costs,budgeted at $166.00 per unit,totaled $175.00 per unit.Budgeted fixed costs totaled $122,000 while actual fixed costs amounted to $118,000.

-What is the flexible budget variance for total expenses?

A)$25,700 unfavorable
B)$29,700 unfavorable
C)$25,700 favorable
D)$29,700 favorable

Question 53

2-18 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 unfavorable
B)$3,000 favorable
C)$3,000 unfavorable
D)$7,000 favorable

Question 54

Zany Brainy projected current year sales of 50,000 units at a unit sale price of $20.00.Actual current year sales were 55,000 units at $22.00 per unit.Actual variable costs,budgeted at $14.00 per unit,totaled $15.00 per unit.Budgeted fixed costs totaled $400,000 while actual fixed costs amounted to $420,000.

-What is the flexible budget variance for operating income?

A)$65,000 favorable
B)$65,000 unfavorable
C)$35,000 unfavorable
D)$35,000 favorable

Question 55

2-16 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 56

Kid Adventures Company projected current year sales of 3,600 swing sets at a unit sale price of $225.00.Actual current year sales were 3,300 units at $215.00 per unit.Actual variable costs,budgeted at $166.00 per unit,totaled $175.00 per unit.Budgeted fixed costs totaled $122,000 while actual fixed costs amounted to $118,000.

-What is the flexible budget variance for operating income?

A)$58,700 favorable
B)$76,400 unfavorable
C)$76,400 favorable
D)$58,700 unfavorable

Question 57

Match each of the following terms to the definitions below by entering the letter of the term on the line in front of the definition.

A)Price variance
B)Efficiency variance
C)Overhead flexible budget variance
D)Production volume variance
____ Measures how well the business keeps unit prices of direct material and direct labor inputs within standards
____ Measures whether the quantity of direct materials or direct labor used to make the actual number of outputs is within the standard allowed for that number of outputs
____ Shows how well management has controlled overhead costs

Question 58

3-2 Standard costs for production inputs help motivate employees by serving as benchmarks against which their performance is measured.

Question 59

2-17 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 60

Zany Brainy projected current year sales of 50,000 units at a unit sale price of $20.00.Actual current year sales were 55,000 units at $22.00 per unit.Actual variable costs,budgeted at $14.00 per unit,totaled $15.00 per unit.Budgeted fixed costs totaled $400,000 while actual fixed costs amounted to $420,000.

-What is the flexible budget variance for variable expenses?

A)$55,000 favorable
B)$50,000 favorable
C)$55,000 unfavorable
D)$50,000 unfavorable

Question 61

3-3 Standard costs for production inputs are used to develop flexible budgets.

Question 62

3-5 The price sensitivity of consumers can be studied using standard costing.

Question 63

3-14 Identify five benefits of standard costs.

Question 64

3-6 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 65

3-10 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 66

4-8 Raw material,ruined through mistakes during production,will result in a materials price variance.

Question 67

3-8 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 68

4-3 An efficiency (quantity)variance for direct materials and direct labor measures how well a company keeps unit prices of material and labor inputs within standards.

Question 69

4-2 A price variance for production inputs is the difference between the actual unit price of an input and the standard unit price of the input,multiplied by the actual input quantity.

Question 70

3-9 When calculating standard costs,what standards do direct materials and direct labor have?

A)Efficiency (quantity)standard
B)Flexible standard
C)Price standard
D)Both A and C

Question 71

4-5 An efficiency variance for production inputs is the difference between the actual quantity of input and the standard quantity of input,multiplied by the actual unit price of input.

Question 72

4-7 A direct materials flexible budget variance can be broken down into a price variance and an efficiency variance.

Question 73

3-12 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 74

3-11 Nadia Corporation,which manufactures straw hats,is developing direct labor standards.The basic direct labor rate is $10.00 per hour.Payroll taxes are 12% of the basic direct labor rate,while fringe benefits such as vacation and health care insurance,are $4.00 per hour.What is the standard rate per direct labor hour?

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

Question 75

3-7 Advantages of using standard costs include all of the following EXCEPT:

A)managers can evaluate the efficiency of production workers.
B)differences between the static budget and the flexible budget can be broken down into price an quantity components.
C)standard costing allows companies to create flexible budgets.
D)consumer motivation for purchases can be analyzed.

Question 76

4-4 If the standard quantity allowed for direct materials and direct labor is less than the actual quantity used,the efficiency variance is unfavorable.

Question 77

3-4 The standard for the direct labor rate per hour includes fringe benefits such as health care insurance and vacations.

Question 78

3-13 Wolanin Corporation,which manufactures straw hats,is developing direct labor standards.The basic direct labor rate is $20.00 per hour.Payroll taxes are 15% of the basic direct labor rate,while fringe benefits such as vacation and health care insurance,are $5.00 per hour.What is the standard rate per direct labor hour?

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

Question 79

4-1 Price variances for direct materials and direct labor show how changes in the usage of raw materials and labor affect a company's profits.

Question 80

4-6 The direct materials price variance is (standard price/ divided units)times actual unit output.