Question 1

The budget variance arises from a comparison of actual variable overhead expenditures with budgeted variable overhead costs.

Accepted Answer

False

Question 2

Which of the following statements is (are)true?

Accepted Answer

E

Question 3

Trois Elles Corporation recently prepared a manufacturing cost budget for an output of 50,000 units,as follows: 
Actual units produced amounted to 60,000.Actual costs incurred were: direct materials,$110,000;direct labor,$60,000;variable overhead,$100,000;and fixed overhead,$97,000.If Trois Elles evaluated performance by the use of a flexible budget,a performance report would reveal a total variance of:

Accepted Answer

A

Question 4

Bunnie's Bakery anticipated making 17,000 fancy cakes during a recent period,requiring 14,000 hours of process time.Each hour of process time was expected to cost the firm $11.Actual activity for the period was higher than anticipated: 18,000 cakes and 15,200 hours.If each hour of process time actually cost Bunnie $12,what process-time variance would be disclosed on a performance report that incorporated static budgets and flexible budgets?

Accepted Answer

To calculate the process-time variance, we need to calculate the static budget and the flexible budget first.

Static budget:
Hourly rate = $11
Process time = 14,000 hours
Total cost = Hourly rate x Process time = $11 x 14,000 = $154,000

Flexible budget:
Hourly rate = $12
Process time = 15,200 hours
Total cost = Hourly rate x Process time = $12 x 15,200 = $182,400

Now, we can calculate the process-time variance using the following formula:

Process-time variance = Flexible budget - Static budget
Process-time variance = $182,400 - $154,000
Process-time variance = $28,400

Therefore, the process-time variance would be $28,400, which is Choice C.

Question 5

Flexible budgets reflect a company's anticipated costs based on variations in:

Accepted Answer

Flexible budgets are designed to adjust to changes in activity levels, allowing companies to better anticipate their costs in relation to changes in production or sales volume. The other options listed do not directly affect a company's budget in the same way as changes in activity levels.

Question 6

A flexible budget:

Accepted Answer

A flexible budget is preferred over a static budget in the evaluation of performance as it allows for adjustments based on actual levels of activity. It also gives management flexibility in terms of meeting budget goals. Additionally, it can be used to compare actual and budgeted costs at various levels of activity, allowing for better analysis of performance. Therefore, the answer is choice E which includes both options B and D.

Question 7

A static budget:

Accepted Answer

A static budget is based on one anticipated activity level, while a flexible budget is based on a range of activity. A flexible budget is preferred over a static budget in the evaluation of performance because it can account for changes in activity levels and provide a more accurate measure of performance. A static budget presents a clear measure of performance only when planned activity and actual activity are the same. Therefore, the best choice is B.

Question 8

What is Gourmet's budgeted total cost if its process hours equal 25,000?

Accepted Answer

The answer of What is Gourmet's budgeted total cost if...

Question 9

Del's Diner anticipated that 84,000 process hours would be worked during an upcoming accounting period when,in fact,90,000 hours were actually worked.One of the company's cost functions is expressed as follows:
Y = $16PH + $640,000 where PH is defined as process hours
What is Del's flexible budget for the preceding cost function?

Accepted Answer

The answer of Del's Diner anticipated that 84,000 process hours...

Question 10

The manufacturing overhead applied to Work-in-Process Inventory by a company that uses standard costing would be computed as actual hours * a predetermined (standard)overhead rate.

Accepted Answer

The answer of The manufacturing overhead applied to Work-in-Process Inventory...

Question 11

Gridiron Merchandising anticipated selling 27,000 units of a major product and paying sales commissions of $6 per unit.Actual sales and sales commissions totaled 27,500 units and $171,400,respectively.If the company used a flexible budget for performance evaluations,Gridiron would report a cost variance of:

Accepted Answer

The flexible budget would anticipate sales commissions of $6 per unit for 27,500 units, totaling $165,000. The actual sales commissions were $171,400, resulting in a cost variance of $6,400 unfavorable (U).

Question 12

Zin,Inc.is planning its cash needs for an upcoming period when 85,000 machine hours are expected to be worked.Activity may drop as low as 78,000 hours if some overdue equipment maintenance procedures are performed;on the other hand,activity could jump to 94,000 hours if one of Zin's major competitors likely goes bankrupt.A flexible cash budget to determine cash needs would best be based on:

Accepted Answer

A flexible cash budget should take into account the potential range of activity levels. In this case, the possible activity levels are 78,000 hours, 85,000 hours, and 94,000 hours, so a flexible budget should be based on all three scenarios. This will allow Zin, Inc. to plan for the best and worst case scenarios in terms of cash needs.

Question 13

If Young operated at 35,000 hours,its total budgeted cost would be:

Accepted Answer

Young's total budgeted cost = (35,000 hours x $25 per hour) = $875,000

Question 14

Delicious Treats (DT)anticipated that 84,000 process hours would be worked during an upcoming accounting period when,in fact,92,000 hours were actually worked.One of the company's cost functions is expressed as follows:
Y = $16PH + $640,000 where PH is defined as process hours
What budgeted dollar amount would appear in DT's static budget and flexible budget for the preceding cost function?

Accepted Answer

The answer of Delicious Treats (DT)anticipated that 84,000 process hours...

Question 15

Interspace Merchandising anticipated selling 29,000 units of a major product and paying sales commissions of $6 per unit.Actual sales and sales commissions totaled 31,500 units and $182,700,respectively.If the company used a static budget for performance evaluations,Interstate would report a cost variance of:

Accepted Answer

The cost variance is calculated as the difference between the actual cost and the budgeted cost. The budgeted cost for sales commissions is 29,000 units x $6 = $174,000. The actual cost is $182,700. The variance is $182,700 - $174,000 = $8,700 unfavorable (U).

Question 16

Which of the following mathematical expressions is found in a typical flexible-budget formula for overhead?

Accepted Answer

A typical flexible-budget formula for overhead includes variable overhead costs as well as fixed overhead costs. Option C includes the budgeted variable overhead cost per unit multiplied by the total activity units, which is then added to the budgeted fixed overhead costs.

Question 17

Flexible budgets reflect a company's anticipated costs based on variations in activity levels.

Accepted Answer

Flexible budgets are designed to adjust in accordance with changes in business activity levels. These budgets are constructed using a range of activity levels to estimate expected costs, making them more adaptable to changes and fluctuations in business operations.

Question 18

Efficient or inefficient use of a specific component of variable overhead (e.g. ,electricity)will cause the variable-overhead efficiency variance?

Accepted Answer

The variable-overhead efficiency variance is calculated by comparing the actual amount of the variable component used to the amount that should have been used based on the actual level of output. Therefore, any inefficient use of the variable overhead component (such as electricity) will result in a variable-overhead efficiency variance as it will cause an increase in the actual cost of variable overhead compared to the expected cost.

Question 19

Young's flexible-budget formula,where Y is defined as total cost and AH represents activity hours,is:

Accepted Answer

The flexible-budget formula typically includes a fixed cost component and a variable cost component per unit of activity. Option B represents this with $720,000 as the fixed cost and $4.50 per activity hour as the variable cost.

Question 20

A flexible budget for 15,000 hours revealed variable manufacturing overhead of $90,000 and fixed manufacturing overhead of $120,000.The budget for 25,000 hours would reveal total overhead costs of $210,000.

Accepted Answer

Since the budget is flexible, it means that the total overhead costs will vary based on the number of hours worked. Therefore, it is not possible to accurately determine the total overhead costs for 25,000 hours based on the information provided.

Quiz 11: Flexible Budgeting and the Management of Overhead and Support Activity Costs