Question 1

To calculate the numbers in a flexible budget,managers use ________.
A) cost functions developed from regression analysis
B) flexible budget formulas
C) cost functions obtained from the high-low method
D) all of the above

Accepted Answer

Flexible budgets are calculated using various methods to estimate costs at different levels of activity. These methods include cost functions developed from regression analysis, flexible budget formulas, and cost functions obtained from the high-low method.

Question 2

Perez Company had the following information available:
Expected Costs and Selling Price Based on 5,000 Units:
$\begin{array} { l  }
 \text {Variable manufacturing costs per unit }&\$32 \
 \text {Fixed manufacturing costs per unit }&\$20 \
 \text {Selling price per unit }&\$ 70\
\end{array}$

$\begin{array} { l  }
 \text {Expected production level }&5,000 \text { units } \
\end{array}$

In the flexible budget at 15,000 units,what is the total manufacturing cost?
A) $480,000
B) $580,000
C) $680,000
D) $780,000

Accepted Answer

B

Question 3

Which of the following is used to develop flexible budgets?
A) fixed overhead variances
B) static budget variances
C) flexible budget variances
D) cost functions

Accepted Answer

Cost functions are used to develop flexible budgets. A cost function represents how a cost changes with different levels of activity. This information can be used to create a flexible budget that adjusts to changes in activity levels. Fixed overhead variances, static budget variances, and flexible budget variances are all used to analyze and interpret budget data, but they are not used to develop flexible budgets.

Question 4

A flexible budget is different from a variable budget.

Accepted Answer

A flexible budget is essentially the same concept as a variable budget, as both adjust based on changes in activity levels or other factors.

Question 5

A company that has an activity-based costing system with multiple cost drivers will prepare a(n)________ budget.
A) financial planning
B) short-range planning
C) activity-based flexible
D) strategic

Accepted Answer

Since the company has an activity-based costing system with multiple cost drivers, it would be appropriate to prepare an activity-based flexible budget. This type of budget is designed to adjust to changes in activity levels and incorporates the various cost drivers used in the activity-based costing system. The other options listed (financial planning, short-range planning, strategic) do not necessarily take into account the same level of detail and complexity as an activity-based flexible budget.

Question 6

When preparing a flexible budget income statement,________ costs are constant at different levels of activity.
A) variable
B) step
C) contributed
D) fixed

Accepted Answer

Fixed costs remain constant regardless of the level of activity, so they remain the same in a flexible budget income statement. Variable costs change with the level of activity and are adjusted accordingly in the flexible budget. Step costs have a fixed level of cost until a certain point of activity is reached, where they increase to a new fixed level of cost. Contributed costs are not a recognized category of costs in accounting.

Question 7

A budget prepared for one expected level of activity is called a ________.
A) flexible budget
B) static budget
C) variable budget
D) rolling budget

Accepted Answer

A budget prepared for one expected level of activity is called a static budget. It is typically prepared in advance of the accounting period and remains constant regardless of the actual level of activity during the period.

Question 8

An example of a favorable variance is ________.
A) actual revenues are less than expected revenues
B) actual expenses are less than expected expenses
C) actual material prices are greater than expected material prices
D) expected labor costs are less than actual labor costs

Accepted Answer

A favorable variance occurs when the actual result exceeds the expected result, which means that actual revenues are greater than expected revenues or actual expenses are less than expected expenses. Option B is the only choice that represents a favorable variance where actual expenses are less than expected expenses. The other options represent unfavorable variances.

Question 9

Huntsman Company's variable selling and administrative expenses are $48,000 at a production level of 6,000 units.If the production level is 8,000 units,what are the variable selling administrative expenses?
A) $48,000
B) $56,000
C) $64,000
D) $80,000

Accepted Answer

Since the variable selling and administrative expenses are variable in nature and depend on the production level. In this case, the production level has increased from 6,000 to 8,000 units. Therefore, the variable selling and administrative expenses will increase proportionately. Using the formula of proportionality, we can calculate the new variable selling and administrative expenses as follows:
New variable selling and administrative expenses = (New production level / Old production level) * Old variable selling and administrative expenses
= (8,000 / 6,000) * 48,000
= 64,000
Thus, the variable selling and administrative expenses at a production level of 8,000 units will be $64,000.

Question 10

The static budget is based on the ________ level of output and the flexible budget is based on the ________ level of output.
A) actual; expected
B) expected; actual
C) expected; planned
D) actual; projected

Accepted Answer

The static budget is based on the expected level of output, whereas the flexible budget is based on the actual level of output. Therefore, the best choice is B: expected; actual.

Question 11

A static budget has multiple levels of activity.

Accepted Answer

A static budget is prepared based on a single level of activity and does not change with the actual level of activity. It assumes a fixed level of sales or production, and does not incorporate any fluctuations in costs or revenues due to changes in activity levels.

Question 12

A static budget is prepared for one expected level of activity.

Accepted Answer

A static budget is prepared for one expected level of activity or volume level, often based on anticipated sales or production levels. It does not change based on actual results or changes in activity levels.

Question 13

Oroz Company had the following information available:
Expected Costs and Selling Price Based on 5,000 units:
$\begin{array} { l  }
 \text {Variable manufacturing costs per unit  }&\$32 \
 \text {Fixed manufacturing costs per unit  }&\$20 \
 \text { Selling price per unit}&\$70 \
\end{array}$

$\begin{array} { l  }
 \text { Expected production level}& \text {5,000 unite }\
\end{array}$

In the flexible budget at 10,000 units,what is the total manufacturing cost?
A) $250,000
B) $420,000
C) $520,000
D) $700,000

Accepted Answer

The answer of Oroz Company had the following information available:
Expected...

Question 14

Unfavorable variances ________ represent bad decisions made by managers.
A) always
B) sometimes
C) never
D) none of the above

Accepted Answer

Unfavorable variances can sometimes be due to factors beyond the control of management, such as unexpected changes in the market or economy. However, they can also be the result of poor decisions made by managers. Therefore, unfavorable variances do not always represent bad decisions made by managers, but they can sometimes do so.

Question 15

If actual expenses are less than expected expenses,the expense variance will be unfavorable.

Accepted Answer

If actual expenses are less than expected expenses, the expense variance will be favorable (i.e., the organization spent less than planned, leading to cost savings). Therefore, the statement in the question is false.

Question 16

A flexible budget adjusts for changes in sales volume and other cost-drivers.

Accepted Answer

A flexible budget is designed to adjust for changes in sales volume and other cost-drivers, such as changes in production levels, labor costs, and material costs. This allows for more accurate budgeting and forecasting, as well as better tracking of actual expenditures against budgeted amounts.

Question 17

Spending less than budgeted for maintenance costs will result in a(n)________ variance.When actual revenues exceed budgeted revenues,this results in a(n)________ variance.
A) unfavorable; unfavorable
B) unfavorable; favorable
C) favorable; unfavorable
D) favorable; favorable

Accepted Answer

Spending less than budgeted for maintenance costs results in a favorable variance because it indicates cost savings. When actual revenues exceed budgeted revenues, it results in a favorable variance as well, indicating better-than-expected financial performance.

Question 18

Which of the following statements is FALSE?
A) Flexible budgets are prepared for a range of activity.
B) Flexible budgets are matched to actual levels of activity.
C) A flexible budget is also called a variable budget.
D) Flexible budgets are based on different assumptions about cost behavior than those used for static budgets.

Accepted Answer

Flexible budgets are based on the same assumptions about cost behavior as static budgets, but they are designed to change with the level of activity, unlike static budgets which are fixed.

Question 19

A favorable expense variance is when budgeted expenses are less than actual expenses.

Accepted Answer

A favorable expense variance occurs when actual expenses are less than budgeted expenses, indicating cost savings.

Question 20

A budget prepared for different levels of activity is called a ________.
A) rolling budget
B) operating budget
C) flexible budget
D) static budget

Accepted Answer

A flexible budget is designed to adjust to different levels of activity or production, while a static budget remains fixed regardless of activity levels. Rolling budgets are continuously updated and revised, while operating budgets focus on day-to-day activities and expenses. Therefore, the best choice is C - flexible budget.

Quiz 8: Flexible Budgets and Variance Analysis

To calculate the numbers in a flexible budget,managers use ________.

Which of the following is used to develop flexible budgets?

A flexible budget is different from a variable budget.

A company that has an activity-based costing system with multiple cost drivers will prepare a(n) ________ budget.

When preparing a flexible budget income statement,________ costs are constant at different levels of activity.

A budget prepared for one expected level of activity is called a ________.

An example of a favorable variance is ________.

Huntsman Company's variable selling and administrative expenses are $48,000 at a production level of 6,000 units.If the production level is 8,000 units,what are the variable selling administrative expenses?

The static budget is based on the level of output and the flexible budget is based on the level of output.

A static budget has multiple levels of activity.

A static budget is prepared for one expected level of activity.

Unfavorable variances ________ represent bad decisions made by managers.

If actual expenses are less than expected expenses,the expense variance will be unfavorable.

A flexible budget adjusts for changes in sales volume and other cost-drivers.

Spending less than budgeted for maintenance costs will result in a(n) variance.When actual revenues exceed budgeted revenues,this results in a(n) variance.

Which of the following statements is FALSE?

A favorable expense variance is when budgeted expenses are less than actual expenses.

A budget prepared for different levels of activity is called a ________.

Quiz 8: Flexible Budgets and Variance Analysis

To calculate the numbers in a flexible budget,managers use ________.

Which of the following is used to develop flexible budgets?

A flexible budget is different from a variable budget.

A company that has an activity-based costing system with multiple cost drivers will prepare a(n) ________ budget.

When preparing a flexible budget income statement,________ costs are constant at different levels of activity.

A budget prepared for one expected level of activity is called a ________.

An example of a favorable variance is ________.

Huntsman Company's variable selling and administrative expenses are $48,000 at a production level of 6,000 units.If the production level is 8,000 units,what are the variable selling administrative expenses?

The static budget is based on the ________ level of output and the flexible budget is based on the ________ level of output.

A static budget has multiple levels of activity.

A static budget is prepared for one expected level of activity.

Unfavorable variances ________ represent bad decisions made by managers.

If actual expenses are less than expected expenses,the expense variance will be unfavorable.

A flexible budget adjusts for changes in sales volume and other cost-drivers.

Spending less than budgeted for maintenance costs will result in a(n) ________ variance.When actual revenues exceed budgeted revenues,this results in a(n) ________ variance.

Which of the following statements is FALSE?

A favorable expense variance is when budgeted expenses are less than actual expenses.

A budget prepared for different levels of activity is called a ________.

The static budget is based on the level of output and the flexible budget is based on the level of output.

Spending less than budgeted for maintenance costs will result in a(n) variance.When actual revenues exceed budgeted revenues,this results in a(n) variance.