Deck 8: Flexible Budgets and Variance Analysis

Question 1

The static budget variance is the variance of actual results from the static budget.

Answer 1

True

Question 2

Efficiency is the degree to which a goal, objective, or target is met.

Answer 2

False

Question 3

If actual expenses are less than expected expenses, the expense variance in the performance report will be unfavorable.

Answer 3

False

Question 4

The reasons that actual results differ from the master budget are independent of one another.

Question 5

By using a flexible budget, changes in activity level cannot cause any variances between the flexible budget and actual results.

Question 6

A favorable expense variance is when budgeted expenses are less than actual expenses.

Question 7

A flexible budget adjusts for changes in sales volume and other cost-driver activities.

Question 8

A static budget has multiple levels of activity.

Question 9

A static budget is prepared for a fixed level of activity.

Question 10

A flexible budget is different from a variable budget.

Question 11

Standard cost systems value products according to actual costs.

Question 12

The unfavorable variances resulting from ideal standards are intended to constantly remind personnel of the continuous need for improvement.

Question 13

Total static-budget variances = activity-level variances + flexible-budget variances.

Question 14

By using a static budget, changes in activity level cannot cause any variances between the flexible budget and actual results.

Question 15

As the terms are used in the budgeting process, it is possible for a company to be efficient at the same time it is ineffective.

Question 16

Currently attainable standards are levels of performance that can be achieved, although their achievement is unlikely.

Question 17

Performance report is a generic term that usually means a comparison of actual results with some budget.

Question 18

If the total sales-activity variance and the static-budget variance are equal to each other, there is no flexible-budget variance.

Question 19

The flexible budget is identical to the master budget in format.

Question 20

An activity-based budget is based on budgeted costs for every activity and related cost driver.

Question 21

Ideal standards have an adverse effect on employee motivation.

Question 22

A favorable direct-labor quantity variance may lead to an unfavorable direct-labor price variance.

Question 23

The quantity and efficiency variances are different.

Question 24

Perfection standards and ideal standards are different.

Question 25

Materials price variance = actual price - standard price) x standard quantity allowed.

Question 26

Sales-activity variances measure how efficient managers have been in meeting the planned sales objective.

Question 27

An expected cost is the cost that is least likely to be attained.

Question 28

A favorable materials price variance may lead to an unfavorable materials usage variance.

Question 29

Currently attainable standards do not make allowances for spoilage and waste.

Question 30

Ideal standards make no provisions for waste, spoilage, and machine breakdowns.

Question 31

Direct-labor quantity variance = actual quantity used - standard quantity allowed) x actual price.

Question 32

One cause of a flexible?budget variance might be a difference between expected and actual hourly wages for factory workers.

Question 33

The total flexible?budget variance can be broken down into a price variance and an effectiveness variance.

Question 34

A quantity variance measures actual deviations from the quantity of inputs that should have been used to achieve the actual output quantity.

Question 35

Favorable variances do not require investigation.

Question 36

Using standard costs is popular with companies in the United States.

Question 37

One of the first questions a manager should consider when explaining a large variance is whether expectations were valid.

Question 38

Variances are signals that actual operations are different from what was anticipated.

Question 39

In most companies, variances are investigated only if they exceed a minimum dollar or percentage deviation from budgeted amounts.

Question 40

Favorable flexible-budget variances are good.

Question 41

The variable-overhead spending variance is the difference between the actual variable overhead and the amount of variable overhead budgeted for the actual level of cost-driver activity.

Question 42

Flat Company currently produces cardboard boxes in an automated process.Expected produc?tion per month is 40,000 units.The required direct materials cost $0.30 per unit.Manufacturing fixed overhead costs are $24,000 per month.Manufacturing overhead is allocated based on units of production.____ is the flexible budget for 40,000 and 20,000 units, respectively.

A)$26,000 and $20,000
B)$36,000 and $30,000
C)$40,000 and $34,000
D)$44,000 and $38,000

Question 43

John Company's master budget sales were $225,000.Actual sales were $220,000. Sales in the prior year were $219,000.The static-budget variance for sales was _____.

A)$5,000 favorable
B)$5,000 unfavorable
C)$6,000 favorable
D)$6,000 unfavorable

Question 44

A budget that is often changed at the end of a reporting period is called a _____budget.

A)balanced
B)cost
C)flexible
D)trial balance

Question 45

A variance is the difference between _____.

A)a budgeted amount and a benchmark amount
B)the required number of inputs for the number of outputs
C)an actual result and a budgeted amount
D)a budgeted amount and a stan?dard amount

Question 46

An example of a favorable variance is _____.

A)actual revenues are less than expected
B)actual expenses are less than expected
C)material prices are greater than expected
D)expected labor costs are less than actual costs

Question 47

Farm Bureau Insurance Company had a static budgeted operating income of $8.6 million; however, actual income was $6.4 million._____ is the static-budget variance of operating income.

A)$6.4 million favorable
B)$8.6 million unfavorable
C)$2.2 million favorable
D)$2.2 million unfavorable

Question 48

Most organizations believe that it is not worthwhile to monitor individual overhead to the same extent as labor and material variances.

Question 49

The labor flexible-budget variance equals the labor price variance plus the labor quantity variance.

Question 50

_____ compares actual results with budget.

A)Performance report
B)Variance
C)Sensitivity analysis
D)Dynamic analysis

Question 51

The Foot Company currently produces sandals in an automated process.Expected produc?tion per month is 20,000 units.The required direct materials cost $1.50 per unit.Manufacturing fixed overhead costs are $45,000 per month.Manufacturing overhead is allocated based on units of production._____ is the budgeted manufacturing fixed overhead rate.

A)$.50 per unit
B)$1.50 per unit
C)$2.25 per unit
D)None of these answers is correct

Question 52

Differences between the static budget and the flexible budget are due to _____.

A)problems of cost control
B)poor usage of material and labor
C)a combination of price and material variances
D)actual activity differing from expected activity levels

Question 53

A static budget is another name for the _____budget.

A)financial
B)operating
C)strategic
D)master

Question 54

Price variances reflect the organization's efficiency at actual levels of activity.

Question 55

_____ probably would not be used as a measure of activity in a flexible budget.

A)Sales volume
B)Number of direct labor hours worked
C)Number of machine hours used
D)Number of hours worked by salespeople

Question 56

The overhead efficiency variance indicates to management how much overhead cost it may waste by not controlling the use of cost-driver activity.

Question 57

The type of budget that serves as the original benchmark for evaluating performance is called a _____ budget.

A)balanced
B)cost
C)flexible
D)static

Question 58

Which of the following statements is false?

A)Flexible budgets help provide a basis for management by exception.
B)Flexible budgets are not based on the same revenue and cost behavior assumptions as the static budget.
C)Flexible budgets are prepared for a range of activity.
D)Flexible budgets are automatically matched to changes in activity levels.

Question 59

If the actual level of sales significantly exceeds the sales in the static budget, the variances associated with the variable costs will probably be _____.

A)favorable
B)unfavorable
C)zero
D)undeterminable

Question 60

Flat Company currently produces cardboard boxes in an automated process.Expected produc?tion per month is 50,000 units.The required direct materials cost is $0.30 per unit.Manufacturing fixed overhead costs are $25,000 per month.Manufacturing overhead is allocated based on units of production._____ is the budgeted manufacturing fixed overhead rate.

A)$2.08 per unit
B)$0.30 per unit
C)$0.50 per unit
D)None of these answers is correct

Question 61

Actual results might differ from the static budget because _____.

A)sales and other cost-driver activities were not the same as originally forecasted
B)revenues or variable costs per unit of activity were not as expected
C)fixed costs per period were not as expected
D)all of these answers are correct

Question 62

Bond Company's depreciation cost is $63,000 when production is 21,000 units. _____ are the total depreciation expenses for 15,000 and 20,000 units, respectively.

A)$45,000 and $60,000
B)$60,000 and $45,000
C)$63,000 and $63,000
D)None of these answers is correct

Question 63

White Company planned to produce 12,000 units.Processing required 16,000 machine hours at a cost of $15,000 + $12 per machine hour.Actual sales were 14,000 units requiring 20,000 machine hours.Actual processing cost was $222,000._____ is the static budget amount for processing.

A)$207,000
B)$213,500
C)$222,000
D)$225,000

Question 64

Hut Company's variable selling and administrative cost is $48,000 when production is 6,000 units._____ are the variable selling and administrative expenses for 7,000 and 8,000 units, respectively.

A)$48,000 and $48,000
B)$56,000 and $64,000
C)$64,000 and $56,000
D)None of these answers is correct

Question 65

Loopy Company had the following information: At a manufacturing level of 5,000 units, variable and fixed manufacturing costs are $30 and $10 per unit, respectively.Selling price is $60 per unit._____ is the total manufacturing cost for 15,000 units.

A)$450,000
B)$500,000
C)$570,000
D)$900,000

Question 66

Pink Company planned to produce 12,000 units.Processing required 16,000 machine hours at a cost of $15,000 + $10.50 per machine hour.Actual sales were 14,000 units requiring 21,000 machine hours.Actual processing cost was $222,000._____ is the flexible budget amount for processing.

A)$188,000
B)$213,500
C)$222,000
D)$235,500

Question 67

Activity-level variances plus flexible-budget variances equals _____.

A)total static-budget variances
B)total standard variances
C)total actual variances
D)none of these answers is correct

Question 68

Roger Company planned to produce 12,000 units.Processing required 16,000 machine hours at a cost of $15,000 + $10.50 per machine hour.Actual sales were 14,000 units requiring 20,000 machine hours.Actual processing cost was $222,000._____ is the activity-level variance for processing.

A)$39,000 favorable
B)$39,000 unfavorable
C)$42,000 favorable
D)$42,000 unfavorable

Question 69

Ben Company planned to produce 12,000 units.This level of activities required 20 set-ups at a cost of $18,000 plus $500 per set-up.Actual sales were 10,000 units, requiring 15 set-ups and 12,000 machine hours.Actual set-up cost was $26,000._____ is the static budget-variance for set-ups.

A)$2,500 favorable
B)$2,500 unfavorable
C)$2,000 favorable
D)$2,000 unfavorable

Question 70

Purple Company planned to produce 12,000 units.Processing required 16,000 machine hours at a cost of $15,000 + $10.50 per machine hour.Actual sales were 14,000 units requiring 20,000 machine hours.Actual processing cost was $222,000._____ is the flexible-budget variance for processing.

A)$3,000 favorable
B)$39,000 unfavorable
C)$3,000 unfavorable
D)None of these answers is correct

Question 71

Peppy Company planned to produce 12,000 units.This level of activities required 20 set-ups at a cost of $22,000 plus $500 per set-up.Actual sales were 10,000 units, requiring 15 set-ups and 12,000 machine hours.Actual set-up cost was $26,000._____ is the flexible budget amount for set-ups.

A)$26,000
B)$22,000
C)$29,500
D)$7,500

Question 72

The Foot Company currently produces sandals in an automated process. Expected produc?tion per month is 20,000 units.The required direct materials cost is $1.50 per unit.Manufacturing fixed overhead costs are $30,000 per month.Manufac?turing overhead is allocated based on units of production._____ is the flexible budget for 15,000 and 20,000 units, respectively.

A)$22,500 and $30,000
B)$52,500 and $60,000
C)$45,000 and $60,000
D)$88,000 and $76,000

Question 73

Effectiveness is indicated by _____.

A)sales-activity variances
B)static-budget variances
C)flexible-budget variances
D)all of these answers are correct

Question 74

Black Company planned to produce and sell 900 units at a total cost of $180,000.Actual production was 900 units at a cost of $170,000, Black Company was _____.

A)efficient
B)inefficient
C)effective
D)ineffective

Question 75

Efficiency is indicated by _____.

A)sales-activity variances
B)static-budget variances
C)flexible-budget variances
D)all of these answers are correct

Question 76

Blue Company planned to sell 35,000 units.Actual sales were 30,000 units. Based on this information, Blue Company was _____.

A)efficient
B)inefficient
C)effective
D)ineffective

Question 77

Pizza Company planned to produce 12,000 units.This level of activities required 40 set-ups at a cost of $18,000 plus $500 per set-up.Actual sales were 10,000 units, requiring 15 set-ups and 12,000 machine hours.Actual set-up cost was $26,000._____ is the static budget amount for set-ups.

A)$26,000
B)$38,000
C)$21,000
D)$25,500

Question 78

Loopy Company had the following information: At a manufacturing level of 5,000 units, variable and fixed manufacturing costs are $32 and $20 per unit, respectively.Selling price is $70 per unit._____ is the total manufacturing cost for 10,000 units.

A)$250,000
B)$700,000
C)$420,000
D)None of these answers is correct

Question 79

Green Company planned to produce 12,000 units.Processing required 16,000 machine hours at a cost of $15,000 + $10.50 per machine hour.Actual sales were 14,000 units requiring 20,000 machine hours.Actual processing cost was $222,000._____ is the static-budget variance for processing.

A)$39,000 favorable
B)$39,000 unfavorable
C)$42,000 favorable
D)$42,000 unfavorable

Question 80

Seinfeld Company planned to produce 12,000 units.This level of activities required 20 set-ups at a cost of $18,000 plus $500 per set-up.Actual sales were 10,000 units, requiring 15 set-ups and 12,000 machine hours.Actual set-up cost was $26,000._____ is the flexible-budget variance for set-ups.

A)$2,000 favorable
B)$2,000 unfavorable
C)$500 favorable
D)$500 unfavorable