Deck 10: Flexible Budgeting and Variance Analysis

Question 1

A flexible budget:

A) Refers to a budget that can be changed if unanticipated circumstances are encountered.
B) Refers to a budget that can be updated and used in future years.
C) Refers to a budget that has scope for new cost lines to be entered while the financial year to which the budget pertains is underway.
D) Refers to a budget that can be flexed to ensure targets are achieved.
E) Refers to a budget that is changed based on the actual volume of sales achieved.

Answer 1

E

Question 2

Which of the following statements is not true?
A )Discrepancies between activity levels in the static budget and actual activity levels result in expense variances that are not necessarily reflective of performance.
B) Flexible budgeting can be achieved by preparing a series of budgets for different levels of sales activity.
C) Any unfavourable cost variances between actual performance and the flexible budget will be attributable to inefficient use of resources.
D) A flexible budget will show what costs and revenues should have been for the actual level of activity achieved.
E) When preparing a flexible budget, changes are generally not made to fixed costs to reflect updated information available.

Answer 2

C

Question 3

Use the following information to answer the next two questions. The BlueGum Hotel predicted $12,000 in variable labour costs and room revenue of $220,000 from 2,000 room sales in its static budget for January. The hotel actually sold 1,800 rooms and incurred $10,000 in variable labour costs in January
-What would be recorded in the BlueGum hotel's flexible budget for variable labour costs in January?
A )$12,000.
B) $10,800.
C) $13,333.
D) $14,000.
E) $11,000.

Answer 3

B

Question 4

Use the following information to answer the next two questions. The BlueGum Hotel predicted $12,000 in variable labour costs and room revenue of $220,000 from 2,000 room sales in its static budget for January. The hotel actually sold 1,800 rooms and incurred $10,000 in variable labour costs in January
-What is the BlueGum hotel's flexible budget variance for labour variable costs in January?
A )$2,000 (favourable).
B) $2,000 (unfavourable).
C) $800 (favourable).
D) $800 (unfavourable).
E) None of the above.

Question 5

Use the following information to answer the next two questions. At the beginning of the current financial year, the BeachShack Hotel established the standard that it should take 45 minutes to process 1 container of laundry. The Hotel also budgeted that laundry labour should be paid $18 per hour.
At the end of May, the laundry department's performance report indicated that 160 hours had been worked in processing 200 containers of laundry. Laundry staff wages for May were $3,200.
-What is the Beach Shack hotel's laundry labour rate variance for May?

A) $320 (unfavourable).
B) $320 (favourable).
C) $180 (unfavourable).
D) $180 (favourable).
E) None of the above.

Question 6

Use the following information to answer the next two questions. At the beginning of the current financial year, the BeachShack Hotel established the standard that it should take 45 minutes to process 1 container of laundry. The Hotel also budgeted that laundry labour should be paid $18 per hour.
At the end of May, the laundry department's performance report indicated that 160 hours had been worked in processing 200 containers of laundry. Laundry staff wages for May were $3,200.
-What is the Beach Shack hotel's laundry labour efficiency variance for May?

A) $90 (unfavourable).
B) $90 (favourable).
C) $180 (unfavourable).
D) $180 (favourable).
E) None of the above.

Question 7

The term 'benchmarking' is generally used to refer to:

A) Using variance analysis as a basis for improving performance.
B) Using flexible budgeting as a basis for improving performance.
C) Comparing dimensions of an organisation's performance to best practice.
D) Adopting a management by objectives philosophy.
E) Placing more emphasis on unfavourable variances than favourable variances.

Question 8

A materials price variance can be calculated as:

A) (Actual amount of materials X actual material cost per unit) - (Budgeted amount of materials X actual material cost per unit).
B) (Actual amount of materials X actual material cost per unit) - (Budgeted amount of materials X budgeted material cost per unit).
C) (Actual amount of materials X actual material cost per unit) - (Actual amount of materials X budgeted material cost per unit).
D) (Actual amount of materials X budgeted material cost per unit) - (Budgeted amount of materials X budgeted material cost per unit).
E) (Actual amount of materials X budgeted material cost per unit) - (Budgeted amount of materials X actual material cost per unit).

Question 9

A materials efficiency variance can be calculated as:

A)(Actual amount of materials X actual material cost per unit) - (Budgeted amount of materials X actual material cost per unit).
B) (Actual amount of materials X actual material cost per unit) - (Budgeted amount of materials X budgeted material cost per unit).
C) (Actual amount of materials X actual material cost per unit) - (Actual amount of materials X budgeted material cost per unit).
D) (Actual amount of materials X budgeted material cost per unit) - (Budgeted amount of materials X budgeted material cost per unit).
E) (Actual amount of materials X budgeted material cost per unit) - (Budgeted amount of materials X actual material cost per unit).

Question 10

A labour rate variance can be calculated as:

A) (Actual labour hours X actual labour rate) - (Budgeted labour hours X actual labour rate).
B) (Actual labour hours X actual labour rate) - (Budgeted labour hours X budgeted labour rate).
C) (Actual labour hours X actual labour rate) - (Actual labour hours X budgeted labour rate).
D) (Actual labour hours X budgeted labour rate) - (Budgeted labour hours X budgeted labour rate).
E) (Actual labour hours X budgeted labour rate) - (Budgeted labour hours X actual labour rate).

Question 11

Use the following information to answer the next two questions. The Big Ben View Hotel predicted $20,000 in variable housekeeping costs and room revenue of $242,000 from 2,200 room sales in its static budget for March. The hotel actually sold 2,310 rooms and incurred $20,800 in variable housekeeping costs in March.
-What would be recorded in the Big Ben View Hotel's flexible budget for variable housekeeping costs in March?

A) $18,000.
B) $19,000
C) $20,000
D) $21,000
E) $22,000

Question 12

Use the following information to answer the next two questions. The Big Ben View Hotel predicted $20,000 in variable housekeeping costs and room revenue of $242,000 from 2,200 room sales in its static budget for March. The hotel actually sold 2,310 rooms and incurred $20,800 in variable housekeeping costs in March.
-What is the Big Ben View Hotel's flexible budget variance for variable housekeeping costs in March?

A) $200 (favourable)
B) $200 (unfavourable)
C) $180 (favourable)
D) $180 (unfavourable)
E) None of the above.

Question 13

Use the following information to answer the next two questions. The Smoke n' Mirrors hotel housekeeping department has established a room cleaning standard of 30 minutes to clean a room by casual staff paid $15 per hour. In April the housekeeping casual staff were paid $20,385 and worked 1,350 hours to clean 3,000 rooms.
-What is the labour rate variance for the casual housekeeping staff at the Smoke n' Mirrors hotel in April?

A) $125 unfavourable variance.
B) $135 unfavourable variance.
C) $145 unfavourable variance.
D) $155 unfavourable variance.
E) $165 unfavourable variance.

Question 14

Use the following information to answer the next two questions. The Smoke n' Mirrors hotel housekeeping department has established a room cleaning standard of 30 minutes to clean a room by casual staff paid $15 per hour. In April the housekeeping casual staff were paid $20,385 and worked 1,350 hours to clean 3,000 rooms.
-What is the labour efficiency variance for the casual housekeeping staff at the Smoke n' Mirrors hotel in April?

A) $1,950 favourable variance.
B) $2,050 favourable variance.
C) $2,150 favourable variance.
D) $2,250 favourable variance.
E) None of the above.

Question 15

Which of the following statements is not true.

A) In a static budget system, a budget is not modified once the actual volume of sales is known.
B) A flexible budget is a control technique that can be used because it can be hard for an organisation to accurately predict its sales volume in a future period.
C) Fixed costs are reported as the same amount in a static and a flexible budget.
D) A labour rate variance arises if the actual wage rate differs to the budgeted wage rate.
E) If the flexible budget figure for material costs is more than the actual figure for material costs, there must be a favourable material price variance.

Question 16

Use the following information to answer the next two questions. The Sydney Harbour Bridge View Hotel predicted $30,000 in variable housekeeping costs and room revenue of $240,000 from 3,000 room sales in its static budget for March. The hotel actually sold 3,300 rooms and incurred $32,000 in variable housekeeping costs in March.
-What would be recorded in the Sydney Harbour Bridge View Hotel's flexible budget for variable housekeeping costs in March?

A) $27,000
B) $30,000
C) $33,000
D) $36,000
E) $39,000

Question 17

Use the following information to answer the next two questions. The Sydney Harbour Bridge View Hotel predicted $30,000 in variable housekeeping costs and room revenue of $240,000 from 3,000 room sales in its static budget for March. The hotel actually sold 3,300 rooms and incurred $32,000 in variable housekeeping costs in March.
-What is the Sydney Harbour Bridge View Hotel's flexible budget variance for variable housekeeping costs in March?

A) $1,000 (favourable)
B) $1,000 (unfavourable)
C) $2,000 (favourable)
D) $2,000 (unfavourable)
E) None of the above