Question 1

The absolute maximum number of units that would be possible under the best conceivable operating conditions is a description of which type of manufacturing capacity?
A)Practical
B)Theoretical
C)Currently attainable (expected)
D)Normal

Accepted Answer

Theoretical capacity refers to the absolute maximum output possible under the best conceivable operating conditions, even if those conditions are not currently attainable or practical.

Question 2

The purpose of a flexible budget is to:

Accepted Answer

The purpose of a flexible budget is to compare actual and budgeted results at virtually any level of production.

Question 3

The level of production that provides complete utilization of all facilities and personnel, but allows for some idle capacity due to operating interruptions such as machinery breakdowns, idle time and other inescapable inefficiencies is:

Accepted Answer

Practical capacity provides complete utilization of all facilities and personnel, but allows for some idle capacity.

Question 4

The normal capacity of Noel Company is 4,000 units per month. At this volume, budgeted fixed and variable factory overhead are $16,000 and $20,000, respectively. In May, actual production was 4,200 units and actual overhead incurred was $37,900. What is the factory overhead application rate at the actual level of production (rounded to the nearest penny)?

Accepted Answer

11eb16ac_e00b_fcd0_984d_cbf05073e74b_TB6154_00 Factory overhead application rate = $37,000/4,200 units = $8.81 per unit

Question 5

Which of the following budgets is used to provide an "apples to apples" comparison of budgeted and actual performance at the actual unit volume attained?

Accepted Answer

A flexible budget is used to compare actual and budgeted performance at the actual production volume.

Question 6

Flexible budgeting is a reporting system wherein the:

Accepted Answer

Flexible budgeting is a reporting system wherein the planned level of activity is adjusted to the actual level of activity before the budget comparison report is prepared.

Question 7

When using a flexible budget, what will occur to fixed costs (on a per unit basis) as production increases?

Accepted Answer

When using a flexible budget, fixed costs (on a per unit basis) will decrease as production increases.

Question 8

Julia Industries produces cookware. The master budget called for production of 75,000 units this year. The budget at that level of production follows:  Due to the popularity of cooking shows on television, Julia Industries now estimates sales will be 80,000 units. What is budgeted operating income at this level?

Accepted Answer

11eb16ac_e00b_3977_984d_d57a3deb255f_TB6154_00 *For sales and variable costs: Per unit = budgeted amount at 75,000 units / 75,000

Question 9

Consider the following about Taylor Corporation:  Assuming Taylor Corporation uses flexible budgeting, what is the variance related to direct materials?

Accepted Answer

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Question 10

Consider the following budgets: (1) Direct materials
(2) Income statement
(3) Production
(4) Cost of goods sold
In what order should these budgets be prepared?

Accepted Answer

The sales budget should be prepared first. The budgeted sales should be used to prepare the production budget. The budgeted production will be needed to determine the direct materials budget. The direct materials budget should be used to prepare the cost of goods sold budget. Once the cost of goods sold budget is determined, that needs to be used to prepare the income statement budget.

Question 11

Quinn Company's master budget called for 30,000 units of production. Budgeted direct material costs at this level were $450,000 or $15 per unit. Quinn actually produced 32,000 units and incurred direct material costs of $496,000. Quinn uses flexible budgeting to evaluate variances and determined that there was a $16,000 unfavorable direct materials variance. All of the following reasons could have contributed to the flexible budget variance except:

Accepted Answer

Because flexible budgeting compares actual results against budgeted amounts at the actual level of production, in this case 32,000, the variance cannot be due to the fact that production levels were different than what the master budget originally called for.

Question 12

Amounts from all of the following budgets feed into the pro-forma income statement except the:

Accepted Answer

The capital expenditures budget is the budget for asset acquisitions. The sales budget feeds directly into the (pro-forma income statement) income statement budget, while the factory overhead and direct materials budgets feed into the income statement budget indirectly through the cost of goods sold budget.

Question 13

A summary of Tanner Company's flexible budget of manufacturing costs follows:  What would the flexible budget of manufacturing costs be at a production volume of 12,000 units?

Accepted Answer

11eb16ac_e00b_6089_984d_f900a5cd12d7_TB6154_00 *Cost per unit = budgeted amount at 10,000 units/10,000

Question 14

Information from the operating budgets of Northwest Industries follows:  If Northwest's income tax rate is 40%, what is the budgeted net income?

Accepted Answer

The budgeted income statement for Northwest Industries would be as follows:
 11eb16ac_e00a_eb55_984d_45a70da510c9_TB6154_00 Note that the amounts from the factory overhead and direct labor budgets would have already been included in the amount shown in the cost of goods sold budget.

Question 15

A plan for timing acquisitions of buildings, equipment or other significant assets is a(n):

Accepted Answer

A capital expenditures budget is a plan for timing acquisitions of buildings, equipment or other significant assets.

Question 16

Quinn Company's master budget called for 30,000 units of production. Budgeted direct material costs at this level were $450,000 or $15 per unit. Quinn actually produced 32,000 units and incurred direct material costs of $496,000. What is Quinn's direct material variance using flexible budgeting?

Accepted Answer

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Question 17

Consider the flexible budget information relating to direct labor costs for Logan Ltd.:  Logan's actual production was 51,000 units and the related cost was $205,500. What is the variance related to direct labor?

Accepted Answer

11eb16ac_e00b_aeae_984d_57c986690726_TB6154_00

Question 18

The normal capacity of Noel Company is 4,000 units per month. At this volume, budgeted fixed and variable factory overhead are $16,000 and $20,000, respectively. In May, actual production was 4,200 units and actual overhead incurred was $37,900. What was the amount of factory overhead allowed for the actual level of production in May?

Accepted Answer

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Question 19

The level of production that is used by most firms for budget development because it represents a logical balance between maximum production capacity and the capacity demanded by actual sales volume is:

Accepted Answer

Normal capacity is the level of production that will meet normal requirements of ordinary sales demand over the years. It is used by most manufacturing firms for budget development.

Question 20

Budgeted inventories for the Remle Company follow:  Calculate the budgeted cost of goods sold.

Accepted Answer

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Quiz 7: Master Budget and Flexible Budgeting

The absolute maximum number of units that would be possible under the best conceivable operating conditions is a description of which type of manufacturing capacity? A)Practical B)Theoretical C)Currently attainable (expected) D)Normal

The purpose of a flexible budget is to:

The level of production that provides complete utilization of all facilities and personnel, but allows for some idle capacity due to operating interruptions such as machinery breakdowns, idle time and other inescapable inefficiencies is:

Which of the following budgets is used to provide an "apples to apples" comparison of budgeted and actual performance at the actual unit volume attained?

Flexible budgeting is a reporting system wherein the:

When using a flexible budget, what will occur to fixed costs (on a per unit basis) as production increases?

Consider the following about Taylor Corporation: Assuming Taylor Corporation uses flexible budgeting, what is the variance related to direct materials?

Consider the following budgets: (1) Direct materials (2) Income statement (3) Production (4) Cost of goods sold In what order should these budgets be prepared?

Amounts from all of the following budgets feed into the pro-forma income statement except the:

A summary of Tanner Company's flexible budget of manufacturing costs follows: What would the flexible budget of manufacturing costs be at a production volume of 12,000 units?

Information from the operating budgets of Northwest Industries follows: If Northwest's income tax rate is 40%, what is the budgeted net income?

A plan for timing acquisitions of buildings, equipment or other significant assets is a(n) :

Quinn Company's master budget called for 30,000 units of production. Budgeted direct material costs at this level were $450,000 or $15 per unit. Quinn actually produced 32,000 units and incurred direct material costs of $496,000. What is Quinn's direct material variance using flexible budgeting?

Consider the flexible budget information relating to direct labor costs for Logan Ltd.: Logan's actual production was 51,000 units and the related cost was $205,500. What is the variance related to direct labor?

The level of production that is used by most firms for budget development because it represents a logical balance between maximum production capacity and the capacity demanded by actual sales volume is:

Budgeted inventories for the Remle Company follow: Calculate the budgeted cost of goods sold.