Deck 7: Flexible Budgets, direct-Cost Variances, and Management Control

Question 1

Answer the following questions using the information below:
Contrafic Corporation used the following data to evaluate its current operating system. The company sells items for $21 each and used a budgeted selling price of $21 per unit.
$$\begin{array} { l r r } & \underline { \text { Actual } } & \text { Budgeted } \\\text { Units sold }& 180,000 \text { units } & 185,000 \text { units } \\\text { Variable costs } & \$ 1,080,000 & \$ 1,295,000 \\\text { Fixed costs }&\$ 800,000 & \$ 775,000\end{array}$$

-What is the static-budget variance of revenues?

A) $105,000 favorable
B) $105,000 unfavorable
C) $8,000 favorable
D) $8,000 unfavorable

Answer 1

$105,000 unfavorable

Question 2

Answer the following questions using the information below:
Contrafic Corporation used the following data to evaluate its current operating system. The company sells items for $21 each and used a budgeted selling price of $21 per unit.
$$\begin{array} { l r r } & \underline { \text { Actual } } & \text { Budgeted } \\\text { Units sold }& 180,000 \text { units } & 185,000 \text { units } \\\text { Variable costs } & \$ 1,080,000 & \$ 1,295,000 \\\text { Fixed costs }&\$ 800,000 & \$ 775,000\end{array}$$

-What is the static-budget variance of variable costs?

A) $25,000 favorable
B) $25,000 unfavorable
C) $215,000 favorable
D) $215,000 unfavorable

Answer 2

$215,000 favorable

Question 3

When considered in isolation,a favorable variance decreases operating income relative to the budgeted amount.

Answer 3

False

Question 4

A master budget is called a static budget because it is developed around a single planned output level.

Question 5

A variance is ________.

A) the difference between actual fixed cost per unit and standard variable cost per unit
B) the standard units of inputs for one output
C) the difference between an actual result and a budgeted performance
D) the difference between actual variable cost per unit and standard fixed cost per unit

Question 6

Answer the following questions using the information below:
Lander Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and used a budgeted selling price of $18 per unit.
$$\begin{array} { l r r } &\text { Actual } &\text { Budgeted }\\\text { Units sold }& 41,000 \text { units } & 40,000 \text { units } \\\text { Variable costs } & \$ 164,000 & \$ 156,000 \\\text { Fixed costs }&\$ 46,000 & \$ 48,000\end{array}$$

-What is the static-budget variance of variable costs?

A) $2,000 favorable
B) $8,000 unfavorable
C) $4,000 favorable
D) $6,000 unfavorable

Question 7

An unfavorable variance indicates that ________.

A) the actual costs are less than the budgeted costs
B) the actual revenues exceed the budgeted revenues
C) the actual units sold are less than the budgeted units
D) the budgeted contribution margin is more than the actual amount

Question 8

A favorable variance results when actual costs exceed budgeted costs.

Question 9

Answer the following questions using the information below:
Lander Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and used a budgeted selling price of $18 per unit.
$$\begin{array} { l r r } &\text { Actual } &\text { Budgeted }\\\text { Units sold }& 41,000 \text { units } & 40,000 \text { units } \\\text { Variable costs } & \$ 164,000 & \$ 156,000 \\\text { Fixed costs }&\$ 46,000 & \$ 48,000\end{array}$$

-What is the static-budget variance of operating income?

A) $10,000 favorable
B) $10,000 unfavorable
C) $12,000 favorable
D) $12,000 unfavorable

Question 10

Regier Company had planned for operating income of $10 million in the master budget but actually achieved operating income of only $7 million.

A) The static-budget variance for operating income is $3 million favorable.
B) The static-budget variance for operating income is $3 million unfavorable.
C) The flexible-budget variance for operating income is $3 million favorable.
D) The flexible-budget variance for operating income is $3 million unfavorable.

Question 11

Answer the following questions using the information below:
Coroid Corporation used the following data to evaluate their current operating system. The company sells items for $11 each and had used a budgeted selling price of $12 per unit.
$$\begin{array} { l r r } & \underline { \text { Actual } } & \text { Budgeted } \\\text { Units sold } & 280,000 \text { units } & 275,000 \text { units } \\\text { Variable costs } & \$ 900,000 & \$ 885,000 \\\text { Fixed costs } & \$ 55,000 & \$ 52,000\end{array}$$

-What is the static-budget variance of variable costs?

A) $12,000 favorable
B) $12,000 unfavorable
C) $15,000 favorable
D) $15,000 unfavorable

Question 12

A master budget is ________.

A) a budget which starts from a zero base
B) developed for a period for a planned output
C) developed at the end of a period
D) a type of flexible budget

Question 13

Answer the following questions using the information below:
Coroid Corporation used the following data to evaluate their current operating system. The company sells items for $11 each and had used a budgeted selling price of $12 per unit.
$$\begin{array} { l r r } & \underline { \text { Actual } } & \text { Budgeted } \\\text { Units sold } & 280,000 \text { units } & 275,000 \text { units } \\\text { Variable costs } & \$ 900,000 & \$ 885,000 \\\text { Fixed costs } & \$ 55,000 & \$ 52,000\end{array}$$

-What is the static-budget variance of revenues?

A) $55,000 favorable
B) $220,000 favorable
C) $220,000 unfavorable
D) $55,000 unfavorable

Question 14

Answer the following questions using the information below:
Lander Corporation used the following data to evaluate their current operating system. The company sells items for $18 each and used a budgeted selling price of $18 per unit.
$$\begin{array} { l r r } &\text { Actual } &\text { Budgeted }\\\text { Units sold }& 41,000 \text { units } & 40,000 \text { units } \\\text { Variable costs } & \$ 164,000 & \$ 156,000 \\\text { Fixed costs }&\$ 46,000 & \$ 48,000\end{array}$$

-What is the static-budget variance of revenues?

A) $18,000 favorable
B) $18,000 unfavorable
C) $6,000 favorable
D) $4,000 unfavorable

Question 15

A favorable variance indicates that ________.

A) budgeted costs are less than actual costs
B) actual revenues exceed budgeted revenues
C) actual operating income is less than the budgeted amount
D) budgeted contribution margin is more than the actual amount

Question 16

A variance is the difference between the actual cost for the current and expected (or budgeted)performance.

Question 17

Answer the following questions using the information below:
Coroid Corporation used the following data to evaluate their current operating system. The company sells items for $11 each and had used a budgeted selling price of $12 per unit.
$$\begin{array} { l r r } & \underline { \text { Actual } } & \text { Budgeted } \\\text { Units sold } & 280,000 \text { units } & 275,000 \text { units } \\\text { Variable costs } & \$ 900,000 & \$ 885,000 \\\text { Fixed costs } & \$ 55,000 & \$ 52,000\end{array}$$

-What is the static-budget variance of operating income?

A) $238,000 favorable
B) $238,000 unfavorable
C) $235,000 favorable
D) $235,000 unfavorable

Question 18

Management by exception is the practice of concentrating on areas not operating as anticipated (such as a cost overrun)and placing less attention on areas operating as anticipated.

Question 19

Management by exception is a practice whereby managers focus more closely on ________.

A) a static budget
B) areas that are not operating as anticipated
C) activity-based costing
D) exceptional decision-making models

Question 20

Answer the following questions using the information below:
Contrafic Corporation used the following data to evaluate its current operating system. The company sells items for $21 each and used a budgeted selling price of $21 per unit.
$$\begin{array} { l r r } & \underline { \text { Actual } } & \text { Budgeted } \\\text { Units sold }& 180,000 \text { units } & 185,000 \text { units } \\\text { Variable costs } & \$ 1,080,000 & \$ 1,295,000 \\\text { Fixed costs }&\$ 800,000 & \$ 775,000\end{array}$$

-What is the static-budget variance of operating income?

A) $85,000 favorable
B) $90,000 unfavorable
C) $110,000 favorable
D) $105,000 unfavorable

Question 21

In a flexible budget ________.

A) variable costs are calculated proportionately for the budgeted level of sales
B) fixed costs are calculated proportionately for the actual level of sales
C) fixed costs are kept at the same level of static budget
D) variable costs are kept at the same level of static budget

Question 22

A flexible budget ________.

A) is another name for management by exception
B) is developed at the end of the period
C) is based on the budgeted level of output
D) provides favorable operating results

Question 23

Which of the following is true of flexible budget?

A) It calculates total variable cost by multiplying actual units by budgeted variable cost per unit.
B) It calculates total fixed cost by multiplying actual units by budgeted fixed cost per unit.
C) It calculates revenues by multiplying budgeted units by actual selling price per unit.
D) It calculates contribution margin by multiplying budgeted units by actual contribution margin per unit.

Question 24

Static-budget variance for operating income is calculated by taking a difference between static-budget operating income and actual operating income.

Question 25

A favorable variance indicates that budgeted costs are less than actual costs.

Question 26

Answer the following questions using the information below:
Domose Inc. planned to use $150 of material per unit but actually used $147 of material per unit, and planned to make 1,100 units but actually made 900 units.
The flexible-budget variance for materials is ________.

A) $2,700 favorable
B) $2,700 unfavorable
C) $3,300 unfavorable
D) $3,300 favorable

Question 27

Variances are used for evaluating performance and for motivating managers.

Question 28

Dynozz Corporation currently produces cardboard boxes in an automated process.Expected production per month is 15,000 units,direct material costs are $0.50 per unit,and manufacturing overhead costs are $15,000 per month.Manufacturing overhead is all fixed costs.What are the flexible budget for 10,000 and 15,000 units,respectively?

A) $15,000; $22,500
B) $15,000; $17,500
C) $20,000; $22,500
D) $20,000; $17,500

Question 29

A flexible-budget variance is $600 favorable for unit-related costs.This indicates that costs were ________.

A) $600 more than the master budget
B) $600 less than for the planned level of activity
C) $600 more than standard for the achieved level of activity
D) $600 less than standard for the achieved level of activity

Question 30

Answer the following questions using the information below:
Dynondo Incorporated planned to use materials of $12 per unit but actually used materials of $13 per unit, and planned to make 1,500 units but actually made 1,800 units.
The flexible-budget amount for materials is ________.

A) $18,000
B) $19,500
C) $21,600
D) $23,400

Question 31

Answer the following questions using the information below:
Domose Inc. planned to use $150 of material per unit but actually used $147 of material per unit, and planned to make 1,100 units but actually made 900 units.
The flexible-budget amount for materials is ________.

A) $165,000
B) $135,000
C) $161,700
D) $132,300

Question 32

An unfavorable flexible-budget variance for variable costs may be the result of ________.

A) using more input quantities than were budgeted
B) paying lower prices for inputs than were budgeted
C) selling output at a higher selling price than budgeted
D) selling less quantity compared to the budgeted

Question 33

Answer the following questions using the information below:
Dynondo Incorporated planned to use materials of $12 per unit but actually used materials of $13 per unit, and planned to make 1,500 units but actually made 1,800 units.
The flexible-budget variance for materials is ________.

A) $1,500 favorable
B) $1,800 unfavorable
C) $1,500 unfavorable
D) $1,800 favorable

Question 34

Answer the following questions using the information below:
Domose Inc. planned to use $150 of material per unit but actually used $147 of material per unit, and planned to make 1,100 units but actually made 900 units.

-The sales-volume variance for materials is ________.

A) $2,700 favorable
B) $29,400 unfavorable
C) $30,000 unfavorable
D) $2,700 unfavorable

Question 35

A favorable variance should be ignored by management.

Question 36

The flexible budget contains ________.

A) budgeted amounts for actual output
B) budgeted amounts for planned output
C) actual costs for actual output
D) actual costs for planned output

Question 37

Which of the following elements are used in calculating revenue in a flexible budget?

A) budgeted selling price and actual quantity of output
B) actual selling price and budgeted quantity of output
C) budgeted selling price and budgeted quantity of output
D) actual selling price and actual quantity of output

Question 38

Which of the following information is needed to prepare a flexible budget?

A) actual units sold
B) actual variable cost
C) actual selling price per unit
D) actual fixed cost

Question 39

Which of the following items will be same for a flexible budget and a master budget?

A) total variable cost
B) total fixed costs
C) total contribution margin
D) total revenues

Question 40

Explain the difference between a static budget and a flexible budget.Explain what is meant by a static budget variance and a flexible budget variance.

Question 41

The actual information pertains to the month of September.As part of the budgeting process,Kriger Fencing Company developed the following static budget for September.Kriger is in the process of preparing the flexible budget and understanding the results. $\begin{array}{lccc} & \text { Actual } & \text { Flexible } & \text { Static } \\& \text { Results } & \text { Budget } & \text { Budget } \\\text { Sales volume (in units) } & 10,000 & & 12,500\\\text { Sales revenues } & \$ 500,000 & \$ & \$ 625,000 \\\text { Variable costs } & 256,000 & \$ & 300,000\\\text { Contribution margin }& 244,000& \$ &325,000\\\text { Fixed costs } & 229,000 & \$ & 225,000\\\text { Operating profit } & \$ 15,000& \$& \$ 100,000\end{array}$ The primary reason for low operating profits was ________.

A) the variable-cost variance
B) increased fixed costs
C) a poor management accounting system
D) lower sales volume than planned

Question 42

Failure of a firm's managers to execute the sales plans may create a favorable sales-volume variance.

Question 43

A sales-volume variance may be the result of quality problems leading to customer dissatisfaction.

Question 44

An unfavorable variance is conclusive evidence of poor performance.

Question 45

Nicholas Company manufacturers TVs.Some of the company's data was misplaced.Use the following information to replace the lost data:
Required:
a.What are the respective flexible-budget revenues (A)?
b.What are the static-budget revenues (B)?
c.What are the actual variable costs (C)?
d.What is the total flexible-budget variance (D)?
e.What is the total sales-volume variance (E)?
f.What is the total static-budget variance?

Question 46

A flexible-budget variance can be subdivided into the static-budget variance and the sales-volume variance.

Question 47

Answer the following questions using the information below:
Aurous Incorporated planned to use $35 of material per unit but actually used $34 of material per unit, and planned to make 1,500 units but actually made 1,300 units.
The flexible-budget variance for materials is ________.

A) $1,500 favorable
B) $1,500 unfavorable
C) $1,300 unfavorable
D) $1,300 favorable

Question 48

Answer the following questions using the information below:
Dynondo Incorporated planned to use materials of $12 per unit but actually used materials of $13 per unit, and planned to make 1,500 units but actually made 1,800 units.
The sales-volume variance for materials is ________.

A) $3,600 favorable
B) $3,900 unfavorable
C) $3,600 unfavorable
D) $3,900 favorable

Question 49

A flexible budget is calculated at the end of the budget period.

Question 50

Answer the following questions using the information below:
The actual information pertains to the month of September. As a part of the budgeting process, Twilith Fencing Company developed the following static budget for September. Twilith is in the process of preparing the flexible budget and understanding the results.
$\begin{array}{lrrr}&\begin{array}{r}\text { Actual } \\\text { Results }\end{array} & \begin{array}{r}\text { Flexible } \\\text { Budget }\end{array} & \begin{array}{r}\text { static } \\\text { Budget }\end{array}\\\text { Sales volume (in units) } & 12,000 & & 15,000 \\\text { Sales revenues } & \$ 600,000 & \$ & \$ 750,000 \\\text { Variable costs } & 307,200 & \$ & 360,000\\\text { Contribution margin }&292,800&\$&7390,000\\\text { Fixed costs } & 274,800& \$ & 270,000 \\\text { Operating profit } & \$ 18,000 & \$ & \$ 120,000\end{array}$

-The flexible-budget variance for variable costs is ________.

A) $19,200 unfavorable
B) $61,440 unfavorable
C) $52,800 favorable
D) $76,800 favorable

Question 51

Answer the following questions using the information below:
The actual information pertains to the month of September. As a part of the budgeting process, Twilith Fencing Company developed the following static budget for September. Twilith is in the process of preparing the flexible budget and understanding the results.
$\begin{array}{lrrr}&\begin{array}{r}\text { Actual } \\\text { Results }\end{array} & \begin{array}{r}\text { Flexible } \\\text { Budget }\end{array} & \begin{array}{r}\text { static } \\\text { Budget }\end{array}\\\text { Sales volume (in units) } & 12,000 & & 15,000 \\\text { Sales revenues } & \$ 600,000 & \$ & \$ 750,000 \\\text { Variable costs } & 307,200 & \$ & 360,000\\\text { Contribution margin }&292,800&\$&7390,000\\\text { Fixed costs } & 274,800& \$ & 270,000 \\\text { Operating profit } & \$ 18,000 & \$ & \$ 120,000\end{array}$

-The flexible budget will report ________ for the fixed costs.

A) $343,500
B) $270,000
C) $274,800
D) $216,000

Question 52

Lunicious Corporation currently produces baseball caps in an automated process.Expected production per month is 15,000 units,direct material costs are $3.50 per unit,and manufacturing overhead costs are $40,000 per month.Manufacturing overhead is entirely fixed costs.What is the flexible budget for 12,000 and 15,000 units,respectively?

A) $74,000; $92,500
B) $74,000; $84,500
C) $82,000; $92,500
D) $82,000; $84,500

Question 53

The president of the company,Gregory Peters,has come to you for help.Use the following data to prepare a flexible budget for possible sales/production levels of 10,000,11,000,and 12,000 units.Show the contribution margin at each activity level.

Question 54

When actual revenues exceed budgeted revenues,a favorable variance arises.

Question 55

A favorable flexible-budget variance for variable costs may be the result of using more input quantities than were budgeted.

Question 56

Answer the following questions using the information below:
The actual information pertains to the month of September. As a part of the budgeting process, Twilith Fencing Company developed the following static budget for September. Twilith is in the process of preparing the flexible budget and understanding the results.
$\begin{array}{lrrr}&\begin{array}{r}\text { Actual } \\\text { Results }\end{array} & \begin{array}{r}\text { Flexible } \\\text { Budget }\end{array} & \begin{array}{r}\text { static } \\\text { Budget }\end{array}\\\text { Sales volume (in units) } & 12,000 & & 15,000 \\\text { Sales revenues } & \$ 600,000 & \$ & \$ 750,000 \\\text { Variable costs } & 307,200 & \$ & 360,000\\\text { Contribution margin }&292,800&\$&7390,000\\\text { Fixed costs } & 274,800& \$ & 270,000 \\\text { Operating profit } & \$ 18,000 & \$ & \$ 120,000\end{array}$

-The flexible budget will report ________ for variable costs.

A) $245,760
B) $360,000
C) $288,000
D) $384,000

Question 57

Answer the following questions using the information below:
Aurous Incorporated planned to use $35 of material per unit but actually used $34 of material per unit, and planned to make 1,500 units but actually made 1,300 units.
The sales-volume variance for materials is ________.

A) $7,000 favorable
B) $7,000 unfavorable
C) $6,800 unfavorable
D) $6,800 favorable

Question 58

The only difference between the static budget and flexible budget is that the static budget is prepared using planned output.

Question 59

Answer the following questions using the information below:
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results.
$\begin{array}{lccc} & \text { Actual } & \text { Flexible } & \text { Static } \\& \text { Results } & \text { Budget } & \text { Budget } \\\text { Sales volume (in units) } & 11,000 & & 10,000\\\\\text { Sales revenues } & \$ 238,000 & \$ & \$230,000 \\\text { Variable costs } & 150,000 & \$ & 180,000\\\\\text { Contribution margin }& 88,000& \$ &50,000\\\\\text { Fixed costs } & 36,000 & \$ & 35,000\\\text { Operating profit } & \$ 52,000& \$& \$ 15,000\end{array}$

-The flexible budget will report ________ for variable costs.

A) $136,364
B) $198,000
C) $30,000
D) $13,583

Question 60

Answer the following questions using the information below:
Aurous Incorporated planned to use $35 of material per unit but actually used $34 of material per unit, and planned to make 1,500 units but actually made 1,300 units.
The flexible-budget amount for materials is ________.

A) $45,500
B) $52,500
C) $51,000
D) $44,200

Question 61

Answer the following questions using the information below:
Genent Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data:
$\begin{array}{|l|r|r|r|r|r|}\hline &\text { Actual } & \text { Flexible Budget } & \text { Flexible } & \text { Sales-Volume } & \text { Static } \\&\text { Results } & \text { Variances } & \text { Budget } & \text { Variances } & \text { Budget } \\\hline\text { Units sold } & 495,000 & & 495,000 & & 453,750 \\\hline \text { Revenues } & \$ 185,150 & \$ 4,400 \mathrm{~F} & (\mathrm{~A}) & \$ 6,160 \mathrm{U} & (\mathrm{B}) \\\hline \text { Variable } & & & & & \\\text { costs } & (\mathrm{C}) & \$ 880 \mathrm{U} & \$ 69,780 & \$ 10,300 \mathrm{~F} & \$ 88,080 \\\hline \text { Fixed costs } & \$ 36,430 & \$ 3,770 \mathrm{~F} & \$ 40,200 & 0 & \$ 40,200 \\\hline \text { Operating } & & & & & \\\text { income } & \$ 78,060 & (\mathrm{D}) & \$ 70,770 & (\mathrm{E}) & \$ 66,630\\\hline\end{array}$

-What is the total static-budget variance?

A) $11,430 favorable
B) $7,290 favorable
C) $4,140 unfavorable
D) $4,140 favorable

Question 62

Answer the following questions using the information below:
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results.
$\begin{array}{lccc} & \text { Actual } & \text { Flexible } & \text { Static } \\& \text { Results } & \text { Budget } & \text { Budget } \\\text { Sales volume (in units) } & 11,000 & & 10,000\\\\\text { Sales revenues } & \$ 238,000 & \$ & \$230,000 \\\text { Variable costs } & 150,000 & \$ & 180,000\\\\\text { Contribution margin }& 88,000& \$ &50,000\\\\\text { Fixed costs } & 36,000 & \$ & 35,000\\\text { Operating profit } & \$ 52,000& \$& \$ 15,000\end{array}$

-The flexible-budget variance for variable costs is ________.

A) $30,000 favorable
B) $31,000 unfavorable
C) $30,000 unfavorable
D) $48,000 favorable

Question 63

Answer the following questions using the information below:
Genent Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data:
$\begin{array}{|l|r|r|r|r|r|}\hline &\text { Actual } & \text { Flexible Budget } & \text { Flexible } & \text { Sales-Volume } & \text { Static } \\&\text { Results } & \text { Variances } & \text { Budget } & \text { Variances } & \text { Budget } \\\hline\text { Units sold } & 495,000 & & 495,000 & & 453,750 \\\hline \text { Revenues } & \$ 185,150 & \$ 4,400 \mathrm{~F} & (\mathrm{~A}) & \$ 6,160 \mathrm{U} & (\mathrm{B}) \\\hline \text { Variable } & & & & & \\\text { costs } & (\mathrm{C}) & \$ 880 \mathrm{U} & \$ 69,780 & \$ 10,300 \mathrm{~F} & \$ 88,080 \\\hline \text { Fixed costs } & \$ 36,430 & \$ 3,770 \mathrm{~F} & \$ 40,200 & 0 & \$ 40,200 \\\hline \text { Operating } & & & & & \\\text { income } & \$ 78,060 & (\mathrm{D}) & \$ 70,770 & (\mathrm{E}) & \$ 66,630\\\hline\end{array}$

-What amounts are reported for revenues in the flexible-budget (A)and the static-budget (B),respectively?

A) $164,320; $178,990
B) $180,750; $186,910
C) $185,150; $177,920
D) $178,990; $186,910

Question 64

Answer the following questions using the information below:
The actual information pertains to the third quarter. As part of the budgeting process, the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter. Duck Decoy is in the process of preparing the flexible budget and understanding the results.
$\begin{array}{lccc} & \text { Actual } & \text { Flexible } & \text { Static } \\& \text { Results } & \text { Budget } & \text { Budget } \\\text { Sales volume (in units) } & 11,000 & & 10,000\\\\\text { Sales revenues } & \$ 238,000 & \$ & \$230,000 \\\text { Variable costs } & 150,000 & \$ & 180,000\\\\\text { Contribution margin }& 88,000& \$ &50,000\\\\\text { Fixed costs } & 36,000 & \$ & 35,000\\\text { Operating profit } & \$ 52,000& \$& \$ 15,000\end{array}$

-The flexible budget will report ________ for the fixed costs.

A) $536,000
B) $35,000 Favorable
C) $35,000
D) $1,000 Unfavorable

Question 65

A difference between the static-budget and the flexible-budget amounts is called the sales-volume variance.

Question 66

The sales-volume variance is sometimes due to ________.

A) the difference between selling price and budgeted selling price
B) quality problems leading to customer dissatisfaction
C) unexpected increase in manufacturing labor time
D) unexpected increase in the use of quantities of inputs of raw material

Question 67

An efficiency variance reflects the difference between ________.

A) actual input quantities used last period and current period
B) an actual input quantity and a budgeted input quantity
C) an actual input quantity used in a company and its main competitor's
D) a standard input quantity in a company and its main competitor's

Question 68

Answer the following questions using the information below:
Genent Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data:
$\begin{array}{|l|r|r|r|r|r|}\hline &\text { Actual } & \text { Flexible Budget } & \text { Flexible } & \text { Sales-Volume } & \text { Static } \\&\text { Results } & \text { Variances } & \text { Budget } & \text { Variances } & \text { Budget } \\\hline\text { Units sold } & 495,000 & & 495,000 & & 453,750 \\\hline \text { Revenues } & \$ 185,150 & \$ 4,400 \mathrm{~F} & (\mathrm{~A}) & \$ 6,160 \mathrm{U} & (\mathrm{B}) \\\hline \text { Variable } & & & & & \\\text { costs } & (\mathrm{C}) & \$ 880 \mathrm{U} & \$ 69,780 & \$ 10,300 \mathrm{~F} & \$ 88,080 \\\hline \text { Fixed costs } & \$ 36,430 & \$ 3,770 \mathrm{~F} & \$ 40,200 & 0 & \$ 40,200 \\\hline \text { Operating } & & & & & \\\text { income } & \$ 78,060 & (\mathrm{D}) & \$ 70,770 & (\mathrm{E}) & \$ 66,630\\\hline\end{array}$

-What is the total flexible-budget variance (D)?

A) $240 unfavorable
B) $0
C) $1,360 favorable
D) $7,290 favorable

Question 69

A price variance reflects the difference between ________.

A) a standard input price in a company and its competitor
B) an actual input price used last period and current period
C) an actual input price used in a company and its competitor
D) an actual input price and a budgeted input price

Question 70

Answer the following questions using the information below:
Genent Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data:
$\begin{array}{|l|r|r|r|r|r|}\hline &\text { Actual } & \text { Flexible Budget } & \text { Flexible } & \text { Sales-Volume } & \text { Static } \\&\text { Results } & \text { Variances } & \text { Budget } & \text { Variances } & \text { Budget } \\\hline\text { Units sold } & 495,000 & & 495,000 & & 453,750 \\\hline \text { Revenues } & \$ 185,150 & \$ 4,400 \mathrm{~F} & (\mathrm{~A}) & \$ 6,160 \mathrm{U} & (\mathrm{B}) \\\hline \text { Variable } & & & & & \\\text { costs } & (\mathrm{C}) & \$ 880 \mathrm{U} & \$ 69,780 & \$ 10,300 \mathrm{~F} & \$ 88,080 \\\hline \text { Fixed costs } & \$ 36,430 & \$ 3,770 \mathrm{~F} & \$ 40,200 & 0 & \$ 40,200 \\\hline \text { Operating } & & & & & \\\text { income } & \$ 78,060 & (\mathrm{D}) & \$ 70,770 & (\mathrm{E}) & \$ 66,630\\\hline\end{array}$

-What is the total sales-volume variance (E)?

A) $14,960 unfavorable
B) $7,290 unfavorable
C) $4,140 favorable
D) $14,960 favorable

Question 71

Quindo Table Company manufactures tables for schools.The 2015 operating budget is based on sales of 44,000 units at $55 per table.Operating income is anticipated to be $132,000.Budgeted variable costs are $35 per unit,while fixed costs total $660,000.
Actual income for 2015 was a surprising $477,000 on actual sales of 46,000 units at $57 each.Actual variable costs were $33 per unit and fixed costs totaled $627,000.
Required:
Prepare a variance analysis report with both flexible-budget and sales-volume variances.

Question 72

A flexible-budget variance pertaining to revenues is often called a sales-volume variance.

Question 73

Standard cost per output unit for each variable direct cost input is calculated by multiplying ________.

A) standard input allowed for one output unit by standard price per input unit
B) standard input allowed for one output unit by actual price per input unit
C) actual input allowed for one output unit by standard price per input unit
D) actual input allowed for one output unit by actual price per input unit

Question 74

If a sales-volume variance was caused by poor-quality products,then the ________ would be in the best position to explain the variance.

A) production manager
B) sales supervisor
C) financial supervisor
D) logistic manager

Question 75

The flexible-budget variance for direct cost inputs can be further subdivided into a ________.

A) static-budget variance and a sales-volume variance
B) sales-volume variance and an efficiency variance
C) price variance and an efficiency variance
D) static-budget variance and a price variance

Question 76

Answer the following questions using the information below:
Genent Company manufactures tires. Some of the company's data was misplaced. Use the following information to replace the lost data:
$\begin{array}{|l|r|r|r|r|r|}\hline &\text { Actual } & \text { Flexible Budget } & \text { Flexible } & \text { Sales-Volume } & \text { Static } \\&\text { Results } & \text { Variances } & \text { Budget } & \text { Variances } & \text { Budget } \\\hline\text { Units sold } & 495,000 & & 495,000 & & 453,750 \\\hline \text { Revenues } & \$ 185,150 & \$ 4,400 \mathrm{~F} & (\mathrm{~A}) & \$ 6,160 \mathrm{U} & (\mathrm{B}) \\\hline \text { Variable } & & & & & \\\text { costs } & (\mathrm{C}) & \$ 880 \mathrm{U} & \$ 69,780 & \$ 10,300 \mathrm{~F} & \$ 88,080 \\\hline \text { Fixed costs } & \$ 36,430 & \$ 3,770 \mathrm{~F} & \$ 40,200 & 0 & \$ 40,200 \\\hline \text { Operating } & & & & & \\\text { income } & \$ 78,060 & (\mathrm{D}) & \$ 70,770 & (\mathrm{E}) & \$ 66,630\\\hline\end{array}$

-What are the actual variable costs (C)?

A) $72,800
B) $70,660
C) $62,640
D) $54,080

Question 77

Which of the following is an advantage of using actual input data from past periods to develop a budget?

A) Past inefficiencies are excluded in the preparation of new budget.
B) Expected future changes are incorporated in the preparation of new budget.
C) Information is available at a low cost.
D) Data represents the ideal performance.

Question 78

Which of the following is a disadvantage of using the standards developed by a firm itself to develop a budget?

A) A firm's inefficiencies will be part of the data.
B) They are not based on realized benchmarks.
C) The expected future changes are not included in the standards.
D) The flexible-budget amounts are difficult to determine.

Question 79

The actual information pertains to the third quarter.As part of the budgeting process,the Duck Decoy Department of Paralith Incorporated had developed the following static budget for the third quarter.Duck Decoy is in the process of preparing the flexible budget and understanding the results. $\begin{array}{lccc} & \text { Actual } & \text { Flexible } & \text { Static } \\& \text { Results } & \text { Budget } & \text { Budget } \\\text { Sales volume (in units) } & 11,000 & & 10,000\\\\\text { Sales revenues } & \$ 238,000 & \$ & \$230,000 \\\text { Variable costs } & 150,000 & \$ & 180,000\\\\\text { Contribution margin }& 88,000& \$ &50,000\\\\\text { Fixed costs } & 36,000 & \$ & 35,000\\\text { Operating profit } & \$ 52,000& \$& \$ 15,000\end{array}$ The primary reason for high actual operating profits was ________.

A) the variable-cost variance
B) increased fixed costs
C) flexible budget variance for revenues
D) lower sales volume than planned

Question 80

An unfavorable sales-volume variance could result from ________.

A) an inappropriate assignment of labor or machines to specific jobs
B) competitors taking market share
C) an inefficiency of a purchasing manager in bargaining with suppliers
D) a decrease in actual selling price compared to anticipated selling price