Question 1

A company's flexible budget for 12,000 units of production showed total contribution margin of $24,000 and fixed costs, $16,000. The operating income expected if the company produces and sells 15,000 units is:

Accepted Answer

The contribution margin per unit is $24,000 / 12,000 units = $2 per unit. For 15,000 units, the total contribution margin is 15,000 units * $2 = $30,000. Subtracting fixed costs of $16,000 gives an operating income of $30,000 - $16,000 = $14,000.

Question 2

Which department is often responsible for the direct materials price variance?

Accepted Answer

The purchasing department is often responsible for sourcing and procuring the direct materials required for production. As such, they are also responsible for negotiating and securing favorable prices for these materials. Hence, they are the most likely department to oversee the direct materials price variance.

Question 3

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. 
-Based on this information, the budgeted amount of variable costs for 20,000 units would be:

Accepted Answer

To calculate the budgeted amount of variable costs for 20,000 units, we need to use the concept of the relevant range. The relevant range is the range of activity within which assumptions about variable and fixed costs are valid. In this case, assuming that the relevant range is between 20,000 and 22,000 units, we can use the high-low method to estimate the variable cost per unit:

Variable cost per unit = (Total variable costs at 22,000 units - Total variable costs at 20,000 units) / (22,000 units - 20,000 units)
Variable cost per unit = ($99,000 - ?) / 2,000 units
Variable cost per unit = $99,000 - $90,000 / 2,000 units
Variable cost per unit = $4.50 per unit

Now, we can use the variable cost per unit to calculate the budgeted amount of variable costs for 20,000 units:

Budgeted variable costs = Variable cost per unit x Number of units 
Budgeted variable costs = $4.50 x 20,000 units 
Budgeted variable costs = $90,000

Therefore, the correct answer is C, $90,000.

Question 4

Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:

Accepted Answer

Fixed costs remain constant regardless of production level, so they stay at $150,000. Variable costs change with production level, so for 10,000 units, they are ($123,000/12,000) * 10,000 = $102,500.

Question 5

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000.
- Based on this information, the budgeted amount of contribution margin for 20,000 units would be:

Accepted Answer

The answer of Based on a predicted level of production...

Question 6

A company's flexible budget for 12,000 units of production showed per unit contribution margin of $3.00 and fixed costs, $20,000. The operating income expected if the company produces and sells 18,000 units is:

Accepted Answer

The operating income is calculated as follows:Operating income = (Selling price per unit - Variable cost per unit) * Number of units sold - Fixed costsIn this case, the selling price per unit is not given, but the contribution margin per unit is given as $3.00. The contribution margin is the difference between the selling price per unit and the variable cost per unit. Therefore, the selling price per unit is $3.00 + Variable cost per unit.The variable cost per unit is not given, but it can be calculated as follows:Variable cost per unit = Fixed costs / Number of units soldIn this case, the fixed costs are $20,000 and the number of units sold is 18,000. Therefore, the variable cost per unit is $20,000 / 18,000 = $1.11.Therefore, the selling price per unit is $3.00 + $1.11 = $4.11.The operating income is then calculated as follows:Operating income = ($4.11 - $1.11) * 18,000 - $20,000 = $34,000

Question 7

Georgia, Inc. has collected the following data on one of its products. The direct materials price variance is: Direct materials standard (4 lbs. @ $1/lb.) $ 4 per finished unit Total direct materials cost variance-unfavorable $ 13,750 Actual direct materials used 150,000 lbs. ^Actual^finished^units^produced^30,000units

Accepted Answer

The answer of Georgia, Inc. has collected the following data...

Question 8

Georgia, Inc. has collected the following data on one of its products. The direct materials quantity variance is: Direct materials standard (4 lbs. @ $1/lb.) $ 4 per finished unit Total direct materials cost variance-unfavorable $ 13,750 Actual direct materials used 150,000 lbs. ^Actual^finished^units^produced^30,000units

Accepted Answer

The direct materials quantity variance is calculated as (Actual Quantity - Standard Quantity) x Standard Price. The standard quantity for 30,000 units is 120,000 lbs (30,000 units x 4 lbs/unit). The variance is (150,000 lbs - 120,000 lbs) x $1/lb = $30,000 unfavorable.

Question 9

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The contribution margin expected if the company produces and sells 16,000 units is:

Accepted Answer

The contribution margin per unit is calculated as (Sales - Variable Costs) / Units = ($48,000 - $18,000) / 12,000 = $2.50 per unit. For 16,000 units, the contribution margin is 16,000 * $2.50 = $40,000.

Question 10

Based on a predicted level of production and sales of 30,000 units, a company anticipates total contribution margin of $105,000, fixed costs of $40,000, and operating income of $65,000. Based on this information, the budgeted operating income for 28,000 units would be:

Accepted Answer

The contribution margin per unit is $105,000 / 30,000 = $3.50. For 28,000 units, the contribution margin is 28,000 * $3.50 = $98,000. Subtracting fixed costs of $40,000 gives an operating income of $58,000.

Question 11

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. 
-Based on this information, the budgeted amount of operating income for 20,000 units would be:

Accepted Answer

The answer of Based on a predicted level of production...

Question 12

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The operating income expected if the company produces and sells 16,000 units is:

Accepted Answer

First, we need to find the contribution margin per unit:
Contribution Margin = Sales - Variable Costs 
Contribution Margin = $48,000 - $18,000 
Contribution Margin = $30,000 
Contribution Margin per Unit = Contribution Margin / Units 
Contribution Margin per Unit = $30,000 / 12,000 
Contribution Margin per Unit = $2.50

Next, we can use the contribution margin approach to find the operating income at 16,000 units of production: 
Operating Income = (Contribution Margin per Unit x Units) - Fixed Costs 
Operating Income = ($2.50 x 16,000) - $16,000 
Operating Income = $24,000

Therefore, the operating income expected if the company produces and sells 16,000 units is $24,000, which corresponds to choice D.

Question 13

Based on a predicted level of production and sales of 12,000 units, a company anticipates reporting operating income of $26,000 after deducting variable costs of $72,000 and fixed costs of $10,000. Based on this information, the budgeted amounts of fixed and variable costs for 15,000 units would be:

Accepted Answer

To find the budgeted amounts of fixed and variable costs for 15,000 units, we need to use the high-low method to calculate the variable cost per unit.

Variable cost per unit = (Total variable costs at high activity level - Total variable costs at low activity level) / (High activity level - Low activity level)

Using the given data: 
Low activity level: 12,000 units 
High activity level: 15,000 units

Variable cost per unit = ($72,000 - $26,000) / (12,000 - 15,000) = $18

Now that we have the variable cost per unit, we can use it to calculate the total variable costs and add it to the fixed costs to get the total costs at the 15,000 unit level.

Total variable costs = Variable cost per unit x Number of units 
Total variable costs = $18 x 15,000 = $270,000

Total costs = Total fixed costs + Total variable costs 
Total costs = $10,000 + $270,000 = $280,000

Therefore, the budgeted amounts of fixed and variable costs for 15,000 units would be $10,000 of fixed costs and $270,000 of variable costs, or answer choice D.

Question 14

Product A has a sales price of $10 per unit. Based on a 10,000-unit production level, the variable costs are $6 per unit and the fixed costs are $3 per unit. Using a flexible budget for 12,500 units, what is the budgeted operating income from Product A?

Accepted Answer

The answer of Product A has a sales price of...

Question 15

Georgia, Inc. has collected the following data on one of its products. The actual cost of the direct materials used is: Direct materials standard (4 lbs. @ $1/lb.) $ 4 per finished unit Total direct materials cost variance-unfavorable $ 13,750 Actual direct materials used 150,000 lbs. ^Actual^finished^units^produced^30,000units

Accepted Answer

The answer of Georgia, Inc. has collected the following data...

Question 16

Parallel Enterprises has collected the following data on one of its products. During the period the company produced 25,000 units. The direct materials price variance is: Direct materials standard (7 kg. @ $2/kg) $ 14 per finished unit Actual cost of materials purchased $ 322,500 ^Actual^direct^materials^purchased^and^used^150,000lbs.

Accepted Answer

The direct materials price variance is calculated as (Actual Price - Standard Price) x Actual Quantity. The standard price is $2/kg, and the actual price is $322,500 / 150,000 lbs = $2.15/kg. The variance is ($2.15 - $2) x 150,000 lbs = $22,500 unfavorable.

Question 17

A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The fixed costs expected if the company produces and sells 16,000 units is:

Accepted Answer

Fixed costs remain constant regardless of the level of production, so they would still be $16,000 at 16,000 units.

Question 18

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000.
- Based on this information, the budgeted amount of sales for 20,000 units would be:

Accepted Answer

The variable cost per unit is $99,000 / 22,000 = $4.50. The total cost for 20,000 units is $90,000 (variable) + $30,000 (fixed) = $120,000. The operating income for 22,000 units is $36,000, so the total sales for 22,000 units is $165,000. The sales per unit is $165,000 / 22,000 = $7.50. Therefore, for 20,000 units, sales would be 20,000 * $7.50 = $150,000.

Question 19

A company's flexible budget for 10,000 units of production reflects sales of $200,000; variable costs of $40,000; and fixed costs of $75,000. Calculate the expected level of operating income if the company produces and sells 13,000 units.

Accepted Answer

The operating income is calculated as sales minus variable costs and fixed costs. For 13,000 units, sales are $260,000 (13,000 units x $20 per unit), variable costs are $52,000 (13,000 units x $4 per unit), and fixed costs remain $75,000. Thus, operating income is $260,000 - $52,000 - $75,000 = $133,000.

Question 20

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000.
- Based on this information, the budgeted amount of fixed costs for 20,000 units would be:

Accepted Answer

Using the high-low method, the variable costs per unit can be calculated:
Variable Cost per Unit = (Total Variable Cost at High Level - Total Variable Cost at Low Level) / (High Level Production - Low Level Production)
Variable Cost per Unit = ($99,000 - $N/A) / (22,000 - 20,000)
Variable Cost per Unit = $49.50

Using the formula for operating income, the budgeted fixed costs can be calculated:
Operating Income = (Sales x Variable Cost per Unit) - Fixed Costs
$36,000 = (22,000 x $49.50) - $30,000
$36,000 = $1,089,000 - $30,000 - Fixed Costs
Fixed Costs = $1,089,000 - $30,000 - $36,000
Fixed Costs = $1,023,000

Therefore, the budgeted amount of fixed costs for 20,000 units would be $1,023,000. However, since fixed costs do not vary with changes in production or sales levels, the answer is simply the given fixed cost of $30,000.

Quiz 23: Flexible Budgets and Standard Costs

A company's flexible budget for 12,000 units of production showed total contribution margin of $24,000 and fixed costs, $16,000. The operating income expected if the company produces and sells 15,000 units is:

Which department is often responsible for the direct materials price variance?

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. -Based on this information, the budgeted amount of variable costs for 20,000 units would be:

Based on predicted production of 12,000 units, a company anticipates $150,000 of fixed costs and $123,000 of variable costs. The flexible budget amounts of fixed and variable costs for 10,000 units are:

Based on a predicted level of production and sales of 22,000 units, a company anticipates total variable costs of $99,000, fixed costs of $30,000, and operating income of $36,000. - Based on this information, the budgeted amount of contribution margin for 20,000 units would be: