Deck 4: Incorporating Actual Output in to the Budget - Flexible Budgeting

Question 1

The primary challenge in creating a flexible budget is:

A) determining how much expenses should increase or decrease with changes in output.
B) estimating future output.
C) identifying the expenditure base to use.
D) identifying an inflation factor for each object code.

Answer 1

A

Question 2

A cost standard specifies the:

A) number of inputs used per output during the expenditure base.
B) cost of inputs consumed during the expenditure base.
C) cost of inputs expected during the budget year.
D) per-output profit expected during the budget year.

Answer 2

B

Question 3

A budget standard specifies the:

A) number of inputs used per output during the expenditure base.
B) cost of inputs consumed during the expenditure base.
C) cost of inputs expected during the budget year.
D) per-output profit expected during the budget year.

Answer 3

C

Question 4

If 20,000 hours of labor were used in the expenditure base, $1,000,000 was paid in salary to produce 5,000 outputs, and wages are expected to increase by 5%, the productivity standard would be:

A) 4.0 hours per output.
B) $200 per output.
C) 4.2 hours per output.
D) $210 per output.

Question 5

If 20,000 hours of labor were used in the expenditure base, $1,000,000 was paid in salary to produce 5,000 outputs, and wages are expected to increase by 5%, the cost standard would be:

A) 4.0 hours per output.
B) $200 per output.
C) 4.2 hours per output.
D) $210 per output.

Question 6

If 20,000 hours of labor were used in the expenditure base, $1,000,000 was paid in salary to produce 5,000 outputs, and wages are expected to increase by 5%, the budget standard would be:

A) 4.0 hours per output.
B) $200 per output.
C) 4.2 hours per output.
D) $210 per output.

Question 7

Assume the budget standard for staff salaries is $50.00 per output and the preliminary budget assumed 4,000 outputs would be produced. At the end of the year, 4,060 units were produced. The final, restated budget for staff salaries:

A) should remain the same as the preliminary budget.
B) should increase by $3,000.
C) should decrease by $3,000.
D) cannot be determined.

Question 8

Assume the budget standard for management salaries is $360,000 per year and the preliminary budget assumed 4,000 outputs would be produced. At the end of the year, 4,060 units were produced. The final, restated budget for management salaries:

A) should remain the same as the preliminary budget.
B) should increase by $5,400.
C) should decrease by $5,400.
D) cannot be determined.

Question 9

Which of the following actions can a manager take to maximize their budget in a flexible budgeting system when output is expected to increase?

A) Designate all costs as variable
B) Select the highest cost standard
C) Select the expenditure base that will supply the highest starting point for the budget
D) Select the highest inflation factors
E) All of these are correct.

Question 10

Which of the following actions would reduce a budget in a flexible budgeting system when output is expected to decrease?

A) Designate all costs as fixed
B) Select the highest cost standard
C) Select the expenditure base that will supply the highest starting point for the budget
D) Select the highest inflation factors
E) All of these are correct.

Question 11

Flexible budgets should not be used when output cannot be accurately predicted.

Question 12

The goal of a flexible budgets is to ensure managers do not spend more than they are allocated in the preliminary budget.