Question 1

Which department is often responsible for the direct materials price variance?
A)The accounting department.
B)The production department.
C)The purchasing department.
D)The finance department.
E)The budgeting department.

Accepted Answer

The purchasing department is often responsible for negotiating and acquiring direct materials, so they would be the most likely department to be responsible for the direct materials price variance.

Question 2

A flexible budget is prepared:
A)Before the operating period only.
B)After the operating period only.
C)During the operating period only.
D)At any time in the planning period.
E)A flexible budget should never be prepared.

Accepted Answer

A flexible budget can be prepared at any time during the planning period. It allows for adjustments to be made based on changing circumstances and can provide a more accurate view of expected costs and revenues.

Question 3

Based on predicted production of 22,000 units, a company anticipates $15,000 of fixed costs and $27,500 of variable costs.The flexible budget amounts of fixed and variable costs for 16,000 units are:
A)$10,910 fixed and $20,000 variable.
B)$10,910 fixed and $27,500 variable.
C)$20,000 fixed and $15,000 variable.
D)$15,000 fixed and $20,000 variable.
E)$15,000 fixed and $27,500 variable.

Accepted Answer

Fixed costs remain at $15,000
Variable costs = ($27,500/22,000) x 16,000 units = $20,000

Question 4

The actual cost of the direct materials used is:
A)$133,750
B)$150,000
C)$106,250
D)$158,750
E)$120,000

Accepted Answer

The answer of The actual cost of the direct materials...

Question 5

A performance report compares the differences between:
A)Actual results and predicted results.
B)Actual results over several periods.
C)Predicted results over several periods.
D)Predicted results over several levels of activity.
E)Predicted results and standard results.

Accepted Answer

A performance report is used to compare the actual results to the predicted results, in order to measure the effectiveness of a certain project or activity. Therefore, the best choice is A, as it directly compares the actual results to the predicted results.

Question 6

Sales analysis is useful for:
A)Planning purposes only.
B)Budgeting purposes only.
C)Control purposes only.
D)Planning and control purposes.
E)Planning and budgeting purposes.

Accepted Answer

Sales analysis is useful for both planning and control purposes. Planning involves setting targets for the future, while control involves monitoring actual performance and making adjustments to align with the plan. Sales analysis can help in setting sales targets, identifying trends, and making informed decisions to improve performance. Control involves comparing actual sales with planned sales, identifying variances, and taking corrective action if needed. Therefore, the best choice is D - planning and control purposes.

Question 7

The direct materials price variance is:
A)$30,000 favorable
B)$30,000 unfavorable
C)$22,500 favorable
D)$37,500 unfavorable
E)$37,500 favorable

Accepted Answer

The answer of The direct materials price variance is:
A)$30,000 favorable
B)$30,000...

Question 8

The direct materials quantity variance is:
A)$30,000 favorable
B)$13,750 unfavorable
C)$16,250 favorable
D)$30,000 unfavorable
E)$13,750 favorable

Accepted Answer

The answer of The direct materials quantity variance is:
A)$30,000 favorable
B)$13,750...

Question 9

Static budget is another name for:
A)Standard budget.
B)Flexible budget.
C)Variable budget.
D)Fixed budget.
E)Rolling budget.

Accepted Answer

Static budget is also known as a Fixed budget, as it does not change with the actual level of activity achieved. Therefore, the answer is D.

Question 10

The entry to record the material variances would include a:
A)Credit to Goods in Process for $133,750.
B)Debit to Direct Material Price Variance for $13,750.
C)Credit to Direct Material Quantity Variance for $13,750.
D)Debit to Goods in Process for $120,000.
E)Debit to Raw Materials for $120,000.

Accepted Answer

The answer of The entry to record the material variances...

Question 11

A planning budget based on a single predicted amount of sales or production volume is called a:
A)Sales budget.
B)Standard budget.
C)Flexible budget.
D)Fixed budget.
E)Variable budget.

Accepted Answer

A fixed budget is based on a single predicted amount of sales or production volume and does not change even if actual sales or production differs from the predicted amount. This type of budget is suitable for businesses with stable sales or production levels and little variability in expenses.

Question 12

Variable budget is another name for:
A)Cash budget.
B)Flexible budget.
C)Fixed budget.
D)Manufacturing budget.
E)Rolling budget.

Accepted Answer

A variable budget is another name for a flexible budget, which adjusts for changes in activity levels. It is not the same as a cash budget, which focuses on cash inflows and outflows, nor is it a fixed budget, which is based on a set period of time and does not adjust for changes in activity levels. It is also not specific to the manufacturing function, so D is not the best choice. A rolling budget is a budget that is continuously updated, but this term is not synonymous with variable/flexible budgets.

Question 13

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:
A)$2,667
B)$14,000
C)$18,667
D)$24,000
E)$35,000

Accepted Answer

To find the operating income for the production and sales of 16,000 units, we need to first calculate the variable cost per unit and the total fixed costs.

Variable cost per unit = total variable costs / number of units = $18,000 / 12,000 units = $1.50 per unit

Total fixed costs = $16,000

Using the flexible budget formula, we can calculate the expected sales, variable costs, and operating income for 16,000 units:

Expected sales = budgeted sales per unit x number of units = $4.00 x 16,000 units = $64,000

Expected variable costs = variable cost per unit x number of units = $1.50 x 16,000 units = $24,000

Expected fixed costs = total fixed costs = $16,000

Operating income = expected sales - expected variable costs - expected fixed costs = $64,000 - $24,000 - $16,000 = $24,000

Therefore, the operating income expected if the company produces and sells 16,000 units is $24,000. The correct answer is D.

Question 14

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:
A)$125,000 fixed and $102,500 variable.
B)$125,000 fixed and $123,000 variable.
C)$102,500 fixed and $150,000 variable.
D)$150,000 fixed and $123,000 variable.
E)$150,000 fixed and $102,500 variable.

Accepted Answer

The answer of Based on predicted production of 12,000 units,...

Question 15

An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity)and that presents the differences between actual and budgeted amounts as variances is called a(n):
A)Sales budget performance report.
B)Flexible budget performance report.
C)Master budget performance report.
D)Static budget performance report.
E)Operating budget performance report.

Accepted Answer

A flexible budget performance report compares actual performance to what the performance should have been at the actual level of activity, which is more useful and accurate for analysis than a static budget performance report, which only compares actual performance to a fixed budget amount. The other options (A, C, E) are not as specific as flexible budget performance report.

Question 16

The direct materials quantity variance is:
A)$30,000 favorable
B)$30,000 unfavorable
C)$22,500 favorable
D)$37,500 unfavorable
E)$37,500 favorable

Accepted Answer

The direct materials quantity variance measures the difference between the actual quantity of materials used and the standard quantity of materials allowed for the actual output. Since the actual quantity used was 15,000 units more than the standard quantity allowed, this means that more materials were used than necessary, leading to higher costs. Therefore, the variance is unfavorable. The calculation is 15,000 units x $2.50 per unit = $37,500 unfavorable. Choice B is the only option that corresponds to this unfavorable variance.

Question 17

The direct materials price variance is:
A)$13,750 unfavorable
B)$16,250 unfavorable
C)$16,250 favorable
D)$30,000 unfavorable
E)$33,000 favorable

Accepted Answer

The answer of The direct materials price variance is:
A)$13,750 unfavorable
B)$16,250...

Question 18

An internal report that compares actual cost and sales amounts with budgeted amounts and identifies the differences between them as favorable or unfavorable variances is called a:
A)Performance report.
B)Production report.
C)Budget report.
D)Variance report.
E)Standard report.

Accepted Answer

The answer of An internal report that compares actual cost...

Question 19

A report based on predicted amounts of revenues and expenses corresponding to the actual level of output is called a:
A)Rolling budget.
B)Production budget.
C)Flexible budget.
D)Merchandise purchases budget.
E)Fixed budget.

Accepted Answer

A flexible budget is based on the level of actual output, allowing for more accurate predictions of revenues and expenses. A rolling budget is continuously updated with new information and is not necessarily based on actual output levels. The production budget only considers production costs, while the merchandise purchases budget only considers expenses related to purchasing merchandise. A fixed budget is based on a predetermined level of output and does not account for changes in actual output levels.

Question 20

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?
A)$12,500
B)$25,000
C)$20,000
D)$30,000
E)$35,000

Accepted Answer

Variable cost per unit = $6
Fixed cost per unit = $3
Total cost per unit = $6 + $3 = $9
Sales price per unit = $10

At 10,000-unit production level, total cost = (10,000 units * $9 per unit) = $90,000
Total revenue = (10,000 units * $10 per unit) = $100,000
Operating income = Total revenue - Total cost = $100,000 - $90,000 = $10,000

Now, for the flexible budget of 12,500 units, 
Total cost at 12,500-unit production level = (12,500 units * $9 per unit) = $112,500
Total revenue at 12,500-unit production level = (12,500 units * $10 per unit) = $125,000
Operating income at 12,500-unit production level = Total revenue - Total cost = $125,000 - $112,500 = $12,500

Therefore, the budgeted operating income from Product A at 12,500-unit production level is $12,500. Hence, the correct answer is C.

Quiz 8: Flexible Budgets and Standard Costing

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

A flexible budget is prepared:

Based on predicted production of 22,000 units, a company anticipates $15,000 of fixed costs and $27,500 of variable costs.The flexible budget amounts of fixed and variable costs for 16,000 units are:

The actual cost of the direct materials used is:

A performance report compares the differences between:

Sales analysis is useful for:

The direct materials price variance is:

The direct materials quantity variance is:

Static budget is another name for:

The entry to record the material variances would include a:

A planning budget based on a single predicted amount of sales or production volume is called a:

Variable budget is another name for:

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:

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:

An internal report that helps management analyze the difference between actual performance and budgeted performance based on the actual sales volume (or other level of activity) and that presents the differences between actual and budgeted amounts as variances is called a(n) :

The direct materials quantity variance is:

The direct materials price variance is:

An internal report that compares actual cost and sales amounts with budgeted amounts and identifies the differences between them as favorable or unfavorable variances is called a:

A report based on predicted amounts of revenues and expenses corresponding to the actual level of output is called a:

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?