Question 1

The static budget variance for materials is £200 F and the budgeted cost for materials is £52,000. If the budgeted volume is 13,000 and the actual volume is 13,500, then the flexible budget variance is
A) £2,200 F.
B) £3,000 F.
C) £2,000 F.
D) £1,800 F.

Accepted Answer

The flexible budget variance can be calculated by adjusting the static budget for the actual volume of output. The static budget variance is £200 F, meaning the actual cost was £200 less than the budgeted cost. The budgeted cost for materials is £52,000 for a budgeted volume of 13,000 units. This gives a budgeted cost per unit of £52,000 / 13,000 = £4 per unit. With an actual volume of 13,500 units, the flexible budget for materials would be 13,500 units * £4 per unit = £54,000. Since the actual cost was £200 less than the static budget of £52,000, the actual cost was £51,800. Therefore, the flexible budget variance is £54,000 (flexible budget) - £51,800 (actual cost) = £2,200 F, indicating that the actual cost was £2,200 less than the flexible budget.

Question 2

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The flexible budget variance for indirect labour for 2011 is
A) £1,250 F.
B) £50 F.
C) £50 U.
D) £1,200 U.

Accepted Answer

The flexible budget variance for indirect labour is calculated by comparing the budgeted costs based on actual production to the actual costs. The budgeted indirect labour cost for actual production (28,000 units) is $28,000 \times £0.05 = £1,400$. The actual indirect labour cost is £1,250. Therefore, the variance is $£1,400 - £1,250 = £150$ favourable (F), not £50. However, given the options provided, it seems there was a mistake in the calculation or in the interpretation of the options. Based on the correct calculation, none of the options accurately reflect the calculated variance. If we proceed with the closest interpretation to the provided data and options, there seems to be a misunderstanding in the calculation presented in the options.

Question 3

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The static budget variance for supplies is
A) £10 U.
B) £10 F.
C) £50 U.
D) £50 F.

Accepted Answer

The static budget variance for supplies is calculated by comparing the budgeted cost to the actual cost. The budgeted cost for supplies is £0.02 per unit for 26,000 units, which equals £520 (£0.02 * 26,000). The actual cost for supplies is £530. Therefore, the variance is £10 unfavorable (£530 - £520 = £10 U), because the actual cost exceeded the budgeted cost.

Question 4

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The static budget variance for direct materials is
A) £100 F.
B) £100 U.
C) £400 F.
D) £400 U.

Accepted Answer

The answer of Figure 16-1
Armati, SA., is looking for feedback...

Question 5

Which of the following is not an objective of responsibility accounting?
A) to redesign processes to be more effective
B) to align individual and organizational goals
C) to influence behaviour
D) to increase profitability

Accepted Answer

Responsibility accounting aims to allocate responsibility for the results of a business to specific individuals or departments. Objective of responsibility accounting are (1) to align individual and organizational goals, (2) to influence behavior, and (3) to increase profitability. Redesigning processes to be more effective is not a specific objective of responsibility accounting.

Question 6

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The flexible budget for direct materials cost in 2011 is
A) £3,500.
B) £3,600.
C) £3,900.
D) £4,000.

Accepted Answer

The flexible budget for direct materials cost is calculated based on the actual production units and the budgeted cost per unit. For direct materials, the budgeted cost per unit is £0.15. With an actual production of 28,000 units, the flexible budget for direct materials is 28,000 units * £0.15/unit = £4,200.

Question 7

If the static budget variance for materials is £200 F and the budgeted cost for materials is £52,000, then the actual cost of materials is
A) £52,000.
B) £52,200.
C) £51,200.
D) £51,800.

Accepted Answer

The static budget variance for materials is given as £200 F, meaning that the actual cost of materials is less than the budgeted cost. Therefore, we can calculate the actual cost of materials by subtracting the static budget variance from the budgeted cost.

Actual cost of materials = Budgeted cost - Static budget variance
Actual cost of materials = £52,000 - £200
Actual cost of materials = £51,800.

Therefore, the answer is D) £51,800.

Question 8

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The flexible budget for rent in 2011 is
A) £100.
B) £200.
C) £2,900.
D) £2,950.

Accepted Answer

The flexible budget for rent is £100 because rent is a fixed cost and does not change with the level of production or sales.

Question 9

The budget most appropriate for control purposes is the
A) static budget.
B) flexible budget.
C) continuous budget.
D) incremental budget.

Accepted Answer

A flexible budget is the most appropriate for control purposes as it adjusts to changes in actual activity levels. It provides a benchmark for evaluating performance by comparing actual results to what should have been spent or earned based on the actual level of activity. The static budget, continuous budget, and incremental budget are not as effective for control purposes as they do not adjust for changes in activity levels or do not capture changes in costs or revenues over time.

Question 10

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The flexible budget variance for total cost for 2011 is
A) £90 U.
B) £140 U.
C) £230 U.
D) £50 U.

Accepted Answer

Flexible budget variance = actual costs - flexible budget
Flexible budget = budgeted fixed costs + (budgeted variable rate x actual output)
Flexible budget = £2,500 + (£50 x 5,400) = £5,700
Flexible budget variance = £5,840 - £5,700 = £140 U.

Question 11

When budgets are used for control,
A) budgeted amounts from different years are compared.
B) actual amounts from different years are compared.
C) budgeted amounts are compared to actual amounts.
D) None of these is correct.

Accepted Answer

When budgets are used for control, budgeted amounts are compared to actual amounts to identify any variances and take corrective actions if needed. Comparing budgeted amounts from different years (Option A) may be useful for trend analysis, but not for control purposes. Similarly, comparing actual amounts from different years (Option B) may be useful for analyzing historical performance, but not for control purposes. Option D is incorrect as at least one of the other choices (Option C) is correct.

Question 12

If production was budgeted at 400 units and the actual production was 420 units, what would be the static budget variance for materials if the actual cost of materials was £4,150 and the budgeted cost per unit is £10?
A) £50 F
B) £200 U
C) £100 F
D) £150 U

Accepted Answer

Static budget variance for materials = (Actual production x Budgeted cost per unit) - Actual cost of materials
= (420 x £10) - £4,150
= £4,200 - £4,150
= £50 U

Therefore, the answer is D, £150 U.

Question 13

If production was budgeted at 400 units and the actual production was 420 units, what would be the flexible budget variance for materials if the actual cost of materials was £4,150 and the budgeted cost per unit is £10?
A) £50 F
B) £200 U
C) £100 F
D) £150 U

Accepted Answer

The answer of If production was budgeted at 400 units...

Question 14

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The static budget variance for total fixed overhead is
A) £50 U.
B) £50 F.
C) £-0-.
D) £100 U.

Accepted Answer

The answer of Figure 16-1
Armati, SA., is looking for feedback...

Question 15

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The total flexible budgeted costs for 2011 are
A) £10,560.
B) £13,460.
C) £13,510.
D) £11,340.

Accepted Answer

To calculate the total flexible budgeted costs, we need to multiply each budgeted cost by the actual activity level, which is given as 8,900 units. 
Total flexible budgeted costs = (Direct material cost per unit x actual units) + (Direct labor cost per unit x actual units) + (Variable overhead cost per unit x actual units) 
= (2.40 x 8,900) + (1.70 x 8,900) + (0.70 x 8,900) 
= £13,460. Therefore, the correct answer is B.

Question 16

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The static budget for total variable costs is
A) £90 U.
B) £180 U.
C) £790 F.
D) £880 F.

Accepted Answer

To calculate the static budget for total variable costs, we need to add up all of the variable costs in the budgeted data. The total variable costs in the budgeted data are £4,960. 
However, the actual total variable costs were £4,170. This is a variance of £790 F (favorable). Therefore, the static budget for total variable costs was £790 more than the actual variable costs.

Question 17

Which of the following is not an essential element of responsibility accounting?
A) assigning responsibility
B) establishing performance measures
C) evaluating performance
D) ridiculing poor performers

Accepted Answer

Ridiculing poor performers is not an essential element of responsibility accounting. The other three elements - assigning responsibility, establishing performance measures, and evaluating performance - are all necessary components of responsibility accounting.

Question 18

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The static budget variance for rent is
A) £100 F.
B) £100 U.
C) £-0-.
D) £50 U.

Accepted Answer

The static budget variance for rent is £0 because the budgeted amount (£100) equals the actual amount (£100), resulting in no variance.

Question 19

Flexible budgets do NOT provide
A) expected costs for a range of activity.
B) budgeted costs for the actual level of activity.
C) budgeted costs for a predetermined level of activity.
D) expected costs for the actual performance level.

Accepted Answer

Flexible budgets are designed to provide budgeted costs for different levels of activity, including the actual level of activity (B), and expected costs for a range of activity (A) and the actual performance level (D). They do not provide budgeted costs for a predetermined level of activity without considering the actual level of activity, which is a characteristic of static budgets.

Question 20

Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:  The following actually occurred: 
-Refer to Figure 16-1. The flexible budget variance for supervision for 2011 is
A) £67 F.
B) £67 U.
C) £50 F.
D) none of these.

Accepted Answer

The flexible budget variance for supervision is calculated by comparing the actual costs to the budgeted costs based on actual production levels. Since the budgeted supervision cost is £800 and the actual supervision cost is £850, the variance is £50 unfavorable (U), not £67. However, the flexible budget variance specifically adjusts budgeted costs for the actual level of output, and since supervision is a fixed cost, its budgeted amount would not change with changes in production volume. Therefore, none of the provided options accurately describe the flexible budget variance for supervision.

Quiz 16: Management Control Systems

The static budget variance for materials is £200 F and the budgeted cost for materials is £52,000. If the budgeted volume is 13,000 and the actual volume is 13,500, then the flexible budget variance is

Which of the following is not an objective of responsibility accounting?

If the static budget variance for materials is £200 F and the budgeted cost for materials is £52,000, then the actual cost of materials is

The budget most appropriate for control purposes is the

When budgets are used for control,

If production was budgeted at 400 units and the actual production was 420 units, what would be the static budget variance for materials if the actual cost of materials was £4,150 and the budgeted cost per unit is £10?

If production was budgeted at 400 units and the actual production was 420 units, what would be the flexible budget variance for materials if the actual cost of materials was £4,150 and the budgeted cost per unit is £10?

Which of the following is not an essential element of responsibility accounting?

Flexible budgets do NOT provide