Deck 9: Flexible Budgets and Performance Analysis

Question 1

A revenue variance is unfavorable if the actual revenue is less than the revenue in the static planning budget.

Answer 1

False

Question 2

An unfavorable activity variance indicates that activity was too high for the amount of sales.

Answer 2

False

Question 3

Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control.

Answer 3

False

Question 4

An unfavorable activity variance for a variable cost occurs because the actual level of activity is higher than expected when the static planning budget was prepared.

Question 5

Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled.

Question 6

A flexible budget should not be used when making comparisons to actual results such as actual expenses.

Question 7

An activity variance is due to the difference between the level of activity used in the flexible budget and the actual level of activity.

Question 8

The revenue and spending variances are the differences between the flexible budget and the actual results for the period.

Question 9

A flexible budget can be used to estimate what revenues and costs should have been,given the actual level of activity for the period.

Question 10

Fixed costs should be included in a flexible budget even though they do not change when the level of activity changes.

Question 11

A favorable spending variance occurs when the actual cost exceeds the amount of the cost in the static planning budget.

Question 12

A revenue variance is favorable if the actual revenue exceeds what the revenue should have been for the actual level of activity of the period.

Question 13

A planning budget is prepared before the period begins and is valid for whatever the actual level of activity turns out to be.

Question 14

A flexible budget cannot be used to estimate what costs should have been at a given level of activity.

Question 15

Controllability has little to do with whether a cost is fixed or variable.

Question 16

A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period.

Question 17

When a flexible budget is used in performance evaluation,actual costs are compared to the static planning budget rather than to what the costs should have been for the actual level of activity during the period.

Question 18

The activity variance for revenue is unfavorable if the actual level of activity for the period is less than the planned level of activity.

Question 19

Fixed costs should be ignored when evaluating how well a manager has controlled costs.

Question 20

An unfavorable spending variance may reflect waste as well as paying too much for inputs.

Question 21

Dehnert Midwifery's cost formula for its wages and salaries is $2,030 per month plus $409 per birth.For the month of May,the company planned for activity of 112 births,but the actual level of activity was 114 births.The actual wages and salaries for the month was $50,800.The wages and salaries in the planning budget for May would be closest to:

A)$47,838
B)$50,800
C)$49,909
D)$48,656

Question 22

Comparing actual results to a budget based on the actual activity for the period is possible with the use of a:

A)monthly budget.
B)master budget.
C)flexible budget.
D)rolling budget.

Question 23

A static planning budget is:

A)a budget for a single level of activity.
B)a budget that ignores inflation.
C)used only for fixed costs.
D)used when the mix of products does not change.

Question 24

Fuhrer Hotel bases its budgets on guest-days.The hotel's static budget for December appears below: The total overhead cost at an activity level of 7,500 guest-days per month should be:

A)$227,250
B)$215,140
C)$216,140
D)$206,040

Question 25

If the actual level of activity is 4% less than planned,then the variable costs in the static budget should be decreased by 4% before comparing them to actual costs.

Question 26

In a flexible budget performance report,actual costs should be compared to the flexible budget at the original budgeted activity level.

Question 27

A major weakness of flexible budgets is that:

A)they are valid for only a single level of activity.
B)they ignore fixed costs.
C)they compare actual costs at one level of activity to budgeted costs at a different level of activity.
D)none of these is a major weakness of flexible budgets.

Question 28

Hatzenbuhler Manufacturing Corporation has prepared the following overhead budget for next month. The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 6,600 machine-hours rather than 6,800 machine-hours?

A)$107,824.00
B)$110,600.00
C)$108,300.00
D)$107,347.06

Question 29

Directly comparing static budget costs to actual costs only makes sense if the costs are variable.

Question 30

Akey Hospital bases its budgets on patient-visits.The hospital's static budget for March appears below: The total overhead cost at an activity level of 3,000 patient-visits per month should be:

A)$97,800
B)$92,100
C)$88,020
D)$92,640

Question 31

A static planning budget is suitable for planning but is inappropriate for evaluating how well costs are controlled.

Question 32

Pettry Snow Removal's cost formula for its vehicle operating cost is $2,170 per month plus $408 per snow-day.For the month of December,the company planned for activity of 16 snow-days,but the actual level of activity was 13 snow-days.The actual vehicle operating cost for the month was $7,600.The vehicle operating cost in the planning budget for December would be closest to:

A)$7,474
B)$9,354
C)$8,698
D)$7,600

Question 33

Peixoto Framing's cost formula for its supplies cost is $1,150 per month plus $14 per frame.For the month of July,the company planned for activity of 556 frames,but the actual level of activity was 555 frames.The actual supplies cost for the month was $9,190.The supplies cost in the planning budget for July would be closest to:

A)$8,920
B)$9,207
C)$8,934
D)$9,190

Question 34

Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance?

A)static planning budget and flexible budget
B)static planning budget and actual results
C)flexible budget and actual results
D)master budget and static planning budget

Question 35

Hoppy Corporation compares monthly operating results to a static budget prepared at the beginning of the month.When the actual level of activity is less than budgeted,which of the following would be true?

A)Variable costs would show favorable variances.
B)Variable costs would show unfavorable variances.
C)Fixed costs would show favorable variances.
D)Fixed costs would show unfavorable variances.

Question 36

Tulip Midwifery's cost formula for its wages and salaries is $2,420 per month plus $388 per birth.For the month of January,the company planned for activity of 119 births,but the actual level of activity was 123 births.The actual wages and salaries for the month was $50,540.The wages and salaries in the flexible budget for January would be closest to:

A)$50,540
B)$48,592
C)$50,144
D)$50,225

Question 37

Ohme Framing's cost formula for its supplies cost is $1,620 per month plus $13 per frame.For the month of April,the company planned for activity of 882 frames,but the actual level of activity was 878 frames.The actual supplies cost for the month was $13,500.The supplies cost in the flexible budget for April would be closest to:

A)$13,086
B)$13,500
C)$13,034
D)$13,027

Question 38

A flexible budget report should contain variable costs and mixed costs but not fixed costs.

Question 39

Papenfuss Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion.The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms.The Inn's overhead budget for the most recent month appears below: The Inn's variable overhead costs are driven by the number of guests. What would be the total budgeted overhead cost for a month if the activity level is 76 guests?

A)$52,848.40
B)$8,343.40
C)$8,274.40
D)$7,373.24

Question 40

Towne Snow Removal's cost formula for its vehicle operating cost is $1,470 per month plus $399 per snow-day.For the month of November,the company planned for activity of 13 snow-days,but the actual level of activity was 9 snow-days.The actual vehicle operating cost for the month was $5,230.The vehicle operating cost in the flexible budget for November would be closest to:

A)$6,657
B)$5,230
C)$4,609
D)$5,061

Question 41

Gastineau Tile Installation Corporation measures its activity in terms of square feet of tile installed.Last month,the budgeted level of activity was 1,230 square feet and the actual level of activity was 1,200 square feet.The company's owner budgets for supply costs,a variable cost,at $2.70 per square foot.The actual supply cost last month was $2,690.In the company's flexible budget performance report for last month,what would have been the spending variance for supply costs?

A)$67 F
B)$550 F
C)$631 F
D)$81 F

Question 42

Danoff Midwifery's cost formula for its wages and salaries is $1,540 per month plus $497 per birth.For the month of March,the company planned for activity of 112 births,but the actual level of activity was 107 births.The actual wages and salaries for the month was $56,850.The activity variance for wages and salaries in March would be closest to:

A)$2,485 U
B)$354 U
C)$2,485 F
D)$354 F

Question 43

Krejci Air uses two measures of activity,flights and passengers,in the cost formulas in its budgets and performance reports.The cost formula for plane operating costs is $41,430 per month plus $2,419 per flight plus $6 per passenger.The company expected its activity in March to be 84 flights and 222 passengers,but the actual activity was 81 flights and 220 passengers.The actual cost for plane operating costs in March was $239,870.The plane operating costs in the planning budget for March would be closest to:

A)$245,958
B)$239,870
C)$248,754
D)$238,689

Question 44

Mondo Snow Removal's cost formula for its vehicle operating cost is $1,060 per month plus $429 per snow-day.For the month of January,the company planned for activity of 11 snow-days,but the actual level of activity was 13 snow-days.The actual vehicle operating cost for the month was $6,310.The activity variance for vehicle operating cost in January would be closest to:

A)$531 U
B)$531 F
C)$858 U
D)$858 F

Question 45

Ishibashi Snow Removal's cost formula for its vehicle operating cost is $1,240 per month plus $337 per snow-day.For the month of February,the company planned for activity of 17 snow-days,but the actual level of activity was 12 snow-days.The actual vehicle operating cost for the month was $5,140.The spending variance for vehicle operating cost in February would be closest to:

A)$144 U
B)$1,829 U
C)$1,829 F
D)$144 F

Question 46

Dus Catering uses two measures of activity,jobs and meals,in the cost formulas in its budgets and performance reports.The cost formula for catering supplies is $400 per month plus $89 per job plus $10 per meal.A typical job involves serving a number of meals to guests at a corporate function or at a host's home.The company expected its activity in March to be 11 jobs and 81 meals,but the actual activity was 7 jobs and 76 meals.The actual cost for catering supplies in March was $1,810.The activity variance for catering supplies in March would be closest to:

A)$406 U
B)$406 F
C)$379 F
D)$379 U

Question 47

Petroski Natural Dying Corporation measures its activity in terms of skeins of yarn dyed.Last month,the budgeted level of activity was 19,700 skeins and the actual level of activity was 19,900 skeins.The company's owner budgets for dye costs,a variable cost,at $0.67 per skein.The actual dye cost last month was $13,910.In the company's flexible budget performance report for last month,what would have been the spending variance for dye costs?

A)$134 U
B)$577 U
C)$711 U
D)$140 U

Question 48

Loggin Midwifery's cost formula for its wages and salaries is $2,380 per month plus $231 per birth.For the month of April,the company planned for activity of 100 births,but the actual level of activity was 102 births.The actual wages and salaries for the month was $25,510.The spending variance for wages and salaries in April would be closest to:

A)$30 F
B)$432 U
C)$30 U
D)$432 F

Question 49

Randt Footwear Corporation's flexible budget cost formula for supplies,a variable cost,is $2.79 per unit of output.The company's flexible budget performance report for last month showed a $5,363 favorable spending variance for supplies.During that month,17,300 units were produced.Budgeted activity for the month had been 17,200 units.The actual cost per unit for indirect materials must have been closest to:

A)$2.48
B)$2.18
C)$2.79
D)$2.17

Question 50

Lynne Catering uses two measures of activity,jobs and meals,in the cost formulas in its budgets and performance reports.The cost formula for catering supplies is $480 per month plus $91 per job plus $14 per meal.A typical job involves serving a number of meals to guests at a corporate function or at a host's home.The company expected its activity in June to be 10 jobs and 79 meals,but the actual activity was 14 jobs and 77 meals.The actual cost for catering supplies in June was $2,970.The catering supplies in the flexible budget for June would be closest to:

A)$2,496
B)$2,970
C)$2,832
D)$3,494

Question 51

Wexell Framing's cost formula for its supplies cost is $1,230 per month plus $10 per frame.For the month of October,the company planned for activity of 592 frames,but the actual level of activity was 597 frames.The actual supplies cost for the month was $7,050.The activity variance for supplies cost in October would be closest to:

A)$50 F
B)$50 U
C)$100 F
D)$100 U

Question 52

Tysor Framing's cost formula for its supplies cost is $2,610 per month plus $17 per frame.For the month of July,the company planned for activity of 710 frames,but the actual level of activity was 712 frames.The actual supplies cost for the month was $14,540.The spending variance for supplies cost in July would be closest to:

A)$140 U
B)$174 F
C)$140 F
D)$174 U

Question 53

Ros Corporation's flexible budget cost formula for indirect materials,a variable cost,is $0.90 per unit of output.If the company's performance report for last month shows a $500 unfavorable spending variance for indirect materials and if 8,000 units of output were produced last month,then the actual costs incurred for indirect materials for the month must have been:

A)$7,650
B)$7,700
C)$7,200
D)$6,700

Question 54

Gershon Air uses two measures of activity,flights and passengers,in the cost formulas in its budgets and performance reports.The cost formula for plane operating costs is $38,720 per month plus $2,061 per flight plus $9 per passenger.The company expected its activity in June to be 76 flights and 238 passengers,but the actual activity was 75 flights and 239 passengers.The actual cost for plane operating costs in June was $196,310.The spending variance for plane operating costs in June would be closest to:

A)$864 F
B)$1,188 U
C)$1,188 F
D)$864 U

Question 55

Hejl Catering uses two measures of activity,jobs and meals,in the cost formulas in its budgets and performance reports.The cost formula for catering supplies is $210 per month plus $86 per job plus $15 per meal.A typical job involves serving a number of meals to guests at a corporate function or at a host's home.The company expected its activity in March to be 23 jobs and 222 meals,but the actual activity was 28 jobs and 217 meals.The actual cost for catering supplies in March was $5,830.The spending variance for catering supplies in March would be closest to:

A)$312 F
B)$312 U
C)$43 F
D)$43 U

Question 56

Loomer Catering uses two measures of activity,jobs and meals,in the cost formulas in its budgets and performance reports.The cost formula for catering supplies is $550 per month plus $95 per job plus $21 per meal.A typical job involves serving a number of meals to guests at a corporate function or at a host's home.The company expected its activity in July to be 12 jobs and 136 meals,but the actual activity was 13 jobs and 137 meals.The actual cost for catering supplies in July was $4,770.The catering supplies in the planning budget for July would be closest to:

A)$4,403
B)$4,770
C)$4,662
D)$4,546

Question 57

Paradiso Medical Clinic measures its activity in terms of patient-visits.Last month,the budgeted level of activity was 1,060 patient-visits and the actual level of activity was 1,050 patient-visits.The cost formula for administrative expenses is $3.00 per patient-visit plus $17,000 per month.The actual administrative expense was $19,300.In the clinic's flexible budget performance report for last month,the spending variance for administrative expenses was:

A)$850 F
B)$220 U
C)$30 F
D)$880 F

Question 58

Biggs Enterprise's flexible budget cost formula for indirect materials,a variable cost,is $0.60 per unit of output.If the company's performance report for last month shows a $200 favorable spending variance for indirect materials and if 9,000 units of output were produced last month,then the actual costs incurred for indirect materials for the month must have been:

A)$5,600
B)$5,400
C)$6,000
D)$5,200

Question 59

Borunda Air uses two measures of activity,flights and passengers,in the cost formulas in its budgets and performance reports.The cost formula for plane operating costs is $37,020 per month plus $2,731 per flight plus $6 per passenger.The company expected its activity in July to be 73 flights and 253 passengers,but the actual activity was 75 flights and 251 passengers.The actual cost for plane operating costs in July was $231,770.The activity variance for plane operating costs in July would be closest to:

A)$6,131 F
B)$5,450 F
C)$6,131 U
D)$5,450 U

Question 60

Olivera Corporation's flexible budget performance report for last month shows that actual indirect materials cost,a variable cost,was $31,178 and that the spending variance for indirect materials cost was $2,261 unfavorable.During that month,the company worked 11,900 machine-hours.Budgeted activity for the month had been 12,200 machine-hours.The cost formula per machine-hour for indirect materials cost must have been closest to:

A)$2.74
B)$2.81
C)$2.37
D)$2.43

Question 61

Zenon Kennel uses tenant-days as its measure of activity;an animal housed in the kennel for one day is counted as one tenant-day.During July,the kennel budgeted for 3,300 tenant-days,but its actual level of activity was 3,260 tenant-days.The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for July: Data used in budgeting: Actual results for July: The food and supplies in the flexible budget for July would be closest to:

A)$27,732
B)$27,597
C)$28,060
D)$26,932

Question 62

Ruetz Clinic uses client-visits as its measure of activity.During November,the clinic budgeted for 2,500 client-visits,but its actual level of activity was 2,520 client-visits.The clinic has provided the following data concerning the formulas to be used in its budgeting: The medical supplies in the flexible budget for November would be closest to:

A)$22,950
B)$22,474
C)$23,124
D)$22,835

Question 63

Labombard Clinic uses client-visits as its measure of activity.During February,the clinic budgeted for 3,600 client-visits,but its actual level of activity was 3,650 client-visits.The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The net operating income in the planning budget for February would be closest to:

A)$7,382
B)$7,800
C)$8,425
D)$7,589

Question 64

Sekuterski Air uses two measures of activity,flights and passengers,in the cost formulas in its budgets and performance reports.The cost formula for plane operating costs is $45,700 per month plus $2,892 per flight plus $4 per passenger.The company expected its activity in November to be 81 flights and 283 passengers,but the actual activity was 80 flights and 282 passengers.The actual cost for plane operating costs in November was $286,360.The plane operating costs in the flexible budget for November would be closest to:

A)$286,360
B)$277,614
C)$281,084
D)$278,188

Question 65

Zenon Kennel uses tenant-days as its measure of activity;an animal housed in the kennel for one day is counted as one tenant-day.During July,the kennel budgeted for 3,300 tenant-days,but its actual level of activity was 3,260 tenant-days.The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for July: Data used in budgeting: Actual results for July: The facility expenses in the flexible budget for July would be closest to:

A)$25,311
B)$24,770
C)$24,701
D)$24,574

Question 66

Gandrud Kennel uses tenant-days as its measure of activity;an animal housed in the kennel for one day is counted as one tenant-day.During June,the kennel budgeted for 2,600 tenant-days,but its actual level of activity was 2,580 tenant-days.The kennel has provided the following data concerning the formulas to be used in its budgeting: The food and supplies in the flexible budget for June would be closest to:

A)$36,993
B)$37,569
C)$37,600
D)$37,320

Question 67

Gandrud Kennel uses tenant-days as its measure of activity;an animal housed in the kennel for one day is counted as one tenant-day.During June,the kennel budgeted for 2,600 tenant-days,but its actual level of activity was 2,580 tenant-days.The kennel has provided the following data concerning the formulas to be used in its budgeting: The net operating income in the flexible budget for June would be closest to:

A)$11,640
B)$14,332
C)$11,382
D)$14,113

Question 68

Zelenka Clinic uses client-visits as its measure of activity.During June,the clinic budgeted for 2,700 client-visits,but its actual level of activity was 2,710 client-visits.The clinic has provided the following data concerning the formulas to be used in its budgeting for June: The administrative expenses in the planning budget for June would be closest to:

A)$5,671
B)$5,511
C)$5,531
D)$5,670

Question 69

Zelenka Clinic uses client-visits as its measure of activity.During June,the clinic budgeted for 2,700 client-visits,but its actual level of activity was 2,710 client-visits.The clinic has provided the following data concerning the formulas to be used in its budgeting for June: The net operating income in the planning budget for June would be closest to:

A)$18,384
B)$16,466
C)$16,220
D)$18,248

Question 70

Vanderhyde Kennel uses tenant-days as its measure of activity;an animal housed in the kennel for one day is counted as one tenant-day.During May,the kennel budgeted for 3,300 tenant-days,but its actual level of activity was 3,340 tenant-days.The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Actual results for May: The administrative expenses in the planning budget for May would be closest to:

A)$7,792
B)$7,886
C)$8,136
D)$8,120

Question 71

Ruetz Clinic uses client-visits as its measure of activity.During November,the clinic budgeted for 2,500 client-visits,but its actual level of activity was 2,520 client-visits.The clinic has provided the following data concerning the formulas to be used in its budgeting: The net operating income in the flexible budget for November would be closest to:

A)$9,461
B)$12,950
C)$9,312
D)$13,376

Question 72

Vanderhyde Kennel uses tenant-days as its measure of activity;an animal housed in the kennel for one day is counted as one tenant-day.During May,the kennel budgeted for 3,300 tenant-days,but its actual level of activity was 3,340 tenant-days.The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Actual results for May: The wages and salaries in the planning budget for May would be closest to:

A)$28,473
B)$27,260
C)$28,818
D)$27,548

Question 73

Ruetz Clinic uses client-visits as its measure of activity.During November,the clinic budgeted for 2,500 client-visits,but its actual level of activity was 2,520 client-visits.The clinic has provided the following data concerning the formulas to be used in its budgeting: The occupancy expenses in the flexible budget for November would be closest to:

A)$11,016
B)$11,224
C)$11,200
D)$11,193

Question 74

Zelenka Clinic uses client-visits as its measure of activity.During June,the clinic budgeted for 2,700 client-visits,but its actual level of activity was 2,710 client-visits.The clinic has provided the following data concerning the formulas to be used in its budgeting for June: The medical supplies in the flexible budget for June would be closest to:

A)$17,717
B)$17,587
C)$18,502
D)$18,440

Question 75

Prater Corporation manufactures and sells a single product.The company uses units as the measure of activity in its budgets and performance reports.During February,the company budgeted for 5,400 units,but its actual level of activity was 5,380 units.The company has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The direct labor in the planning budget for February would be closest to:

A)$17,754
B)$17,820
C)$18,164
D)$18,232

Question 76

Gandrud Kennel uses tenant-days as its measure of activity;an animal housed in the kennel for one day is counted as one tenant-day.During June,the kennel budgeted for 2,600 tenant-days,but its actual level of activity was 2,580 tenant-days.The kennel has provided the following data concerning the formulas to be used in its budgeting: The facility expenses in the flexible budget for June would be closest to:

A)$16,308
B)$16,360
C)$16,223
D)$15,974

Question 77

Labombard Clinic uses client-visits as its measure of activity.During February,the clinic budgeted for 3,600 client-visits,but its actual level of activity was 3,650 client-visits.The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The personnel expenses in the planning budget for February would be closest to:

A)$47,635
B)$47,340
C)$47,075
D)$46,430

Question 78

Vanderhyde Kennel uses tenant-days as its measure of activity;an animal housed in the kennel for one day is counted as one tenant-day.During May,the kennel budgeted for 3,300 tenant-days,but its actual level of activity was 3,340 tenant-days.The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for May: Data used in budgeting: Actual results for May: The net operating income in the planning budget for May would be closest to:

A)$13,020
B)$19,025
C)$13,436
D)$19,489

Question 79

Zenon Kennel uses tenant-days as its measure of activity;an animal housed in the kennel for one day is counted as one tenant-day.During July,the kennel budgeted for 3,300 tenant-days,but its actual level of activity was 3,260 tenant-days.The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for July: Data used in budgeting: Actual results for July: The net operating income in the flexible budget for July would be closest to:

A)$9,700
B)$6,599
C)$6,762
D)$9,340

Question 80

Labombard Clinic uses client-visits as its measure of activity.During February,the clinic budgeted for 3,600 client-visits,but its actual level of activity was 3,650 client-visits.The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for February: Data used in budgeting: Actual results for February: The administrative expenses in the planning budget for February would be closest to:

A)$4,853
B)$4,920
C)$4,720
D)$4,730