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The purpose of a flexible budget is to: Remove items from performance reports that are not controllable by managers. Permit managers to reduce the...

Question:

The purpose of a flexible budget is to:

  1. Remove items from performance reports that are not controllable by managers.
  2. Permit managers to reduce the number of unfavorable variances that are reported.
  3. Update the static planning budget to reflect the actual level of activity of the period.
  4. Reduce the amount of conflict between departments when the master budget is prepared.

Question 12         

A static budget:

  1. Should be compared to actual costs to assess how well costs were controlled.
  2. Should be compared to a flexible budget to assess how well costs were controlled.
  3. Is valid for only one level of activity.
  4. Represents the best way to set spending targets for managers.

Question 13         

Which of the following comparisons best isolates the impact of a change in activity on performance?

  1. static planning budget and flexible budget
  2. static planning budget and actual results
  3. flexible budget and actual results
  4. master budget and static planning budget

Question 14         

Salyers Family Inn is a bed and breakfast establishment in a converted 100-year-old mansion. The Inn's guests appreciate its gourmet breakfasts and individually decorated rooms. The Inn's overhead budget for the most recent month appears below Activity level…………………………… 57 guests

Variable overhead costs:

Supplies……………………………… $ 148.20

Laundry……………………………... 216.60

Fixed overhead costs:

Utilities……………………………... 170.00

Salaries and wages…………………. 4,310.00

Depreciation……………………….. 2,340.00

Total overhead cost…………………… $7,184.80

The Inn's variable overhead costs are driven by the number of guests.What would be the total budgeted overhead cost for a month if the activity level is 53 guests?

  1. $7,159.20
  2. $6,680.60
  3. $7,184.80
  4. $26,154.40

Question 15         

Wadhams Snow Removal's cost formula for its vehicle operating cost is $1,900 per month plus $430 per snow-day. For the month of December, the company planned for activity of 16 snow-days, but the actual level of activity was 21 snow-days. The actual vehicle operating cost for the month was $11,470. The vehicle operating cost in the planning budget for December would be closest to:

  1. $10,930
  2. $11,470
  3. $8,739
  4. $8,780

Question 16         

Petersheim Snow Removal's cost formula for its vehicle operating cost is $1,750 per month plus $484 per snow-day. For the month of November, the company planned for activity of 15 snow-days, but the actual level of activity was 14 snow-days. The actual vehicle operating cost for the month was $8,360. The vehicle operating cost in the flexible budget for November would be closest to:

  1. $8,526
  2. $8,409
  3. $9,010
  4. $8,360

 

Question 17         

Schlick Framing's cost formula for its supplies cost is $1,770 per month plus $12 per frame. For the month of August, the company planned for activity of 628 frames, but the actual level of activity was 631 frames. The actual supplies cost for the month was $9,790. The activity variance for supplies cost in August would be closest to:

  1. $36 F
  2. $484 F
  3. $484 U
  4. $36 U

Question 18         

Flexible budgets can be used when there is (are):

  1. More than one cost driver (i.e., measure of activity).
  2. Only one cost driver.
  3. Two drivers, but the one used MUST be the dominate driver.
  4. None of these. Cost drivers are not relevant for flexible budgets.

Question 19         

A spending variance is the difference between:

  1. The costs that should have been and the costs that were actually incurred.
  2. The costs that were actually incurred and the costs that should have been incurred, given the actual level of activity.
  3. His revenue what should have been and the revenues that were planned.
  4. The costs that were planned and the costs that were incurred and both were at different levels of activity.

 

 

Question 20         

If activity is higher than expected: total variable costs should be higher than expected. If activity is lower than expected, total variable costs should be lower than expected.

  1. Total costs should be higher because both variable and fixed costs increase also.
  2. Fixed costs will also increase within the relevant range.
  3. Variable costs will increase and fixed costs will not change within the relevant range.
  4. No behavior for variable and fix can be projected or expected.