ACCT Ch. 9 Quiz
A budget that is based on the actual activity of a period is known as a:
flexible budget
Cosden Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Fixed Element per MonthVariable Element per Well ServicedRevenue $4,700Employee salaries and wages$41,300 $1,000Servicing materials $600Other expenses$40,200 When the company prepared its planning budget at the beginning of May, it assumed that 29 wells would have been serviced. However, 31 wells were actually serviced during May. The total expenses in the flexible budget for May would have been closest to:
$131,100 Flexible BudgetWells serviced (q) 31Expenses: Employee salaries and wages ($41,300 + $1,000q)$72,300Servicing materials ($600q) 18,600Other expenses ($40,200) 40,200Total expenses$131,100
At Jacobson Company, indirect labor is a variable cost that varies with direct labor-hours. Last month's performance report showed that actual indirect labor cost totaled $5,780 for the month and that the associated spending variance was $245 F. If 24,100 direct labor-hours were actually worked last month, then the flexible budget cost formula for indirect labor must be (per direct labor-hour):
0.25 Flex Budget Indirect Labor Hours Cost = 5780 + 245 (because 245 is favorable, we add it) = 6025 flex budget indirect labor cost Rate = flex budget indirect labor cost / hours actually worked = 6025 / 24100 = 0.25
Hirons Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $59,150 per month plus $3,138 per flight plus $17 per passenger. The company expected its activity in November to be 80 flights and 248 passengers, but the actual activity was 83 flights and 250 passengers. The actual cost for plane operating costs in November was $312,630. The spending variance for plane operating costs in November would be closest to:
11224 F Spending variance= budget cost for actual output-actual cost =(59150+(3138*83)+(17*250))-312630 =323854-312630 =11224 F
Herlocker Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Fixed Element per Month Variable Element per Container RefurbishedRevenue $4,600Employee salaries and wages$42,700 $1,100Refurbishing materials $600Other expenses$29,100 When the company prepared its planning budget at the beginning of February, it assumed that 26 containers would have been refurbished. The amount shown for revenue in the planning budget for February would have been closest to:
119600 (4600*26)
Canniff Air uses two measures of activity, flights and passengers, in the cost formulas in its budgets and performance reports. The cost formula for plane operating costs is $56,710 per month plus $2,624 per flight plus $8 per passenger. The company expected its activity in February to be 62 flights and 260 passengers, but the actual activity was 61 flights and 261 passengers. The actual cost for plane operating costs in February was $217,630. The plane operating costs in the planning budget for February would be closest to:
221478 = 56710 + (2624*62) + (8*260) = 56710 + 162688 + 2080 = 221,478
Barsness Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for November. Fixed Element per MonthVariable Element per Well ServicedActual Total for NovemberRevenue $4,400$190,100Employee salaries and wages$56,800 $1,100$103,400Servicing materials $700$29,800Other expenses$34,800 $35,300 When the company prepared its planning budget at the beginning of November, it assumed that 39 wells would have been serviced. However, 43 wells were actually serviced during November. The amount shown for "Other expenses" in the planning budget for November would have been closest to
34800
Petrus Framing's cost formula for its supplies cost is $1,820 per month plus $9 per frame. For the month of March, the company planned for activity of 622 frames, but the actual level of activity was 629 frames. The actual supplies cost for the month was $7,890. The activity variance for supplies cost in March would be closest to:
63 U Activity variance=(Budgeted - Actual)*variable cost Activity variance=(622-629)*9 Activity variance=(63.00) Unfavorable
Bonavita Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Fixed Element per MonthVariable Element per Customer ServedRevenue $4,200Employee salaries and wages$41,300 $1,200Travel expenses $500Other expenses$33,000 When the company prepared its planning budget at the beginning of July, it assumed that 33 customers would have been served. The amount shown for net operating income in the planning budget for July would have been closest to:
8200 Revenue = 33*4200 = 138600 Expense = (1700*33)+41300+33000 = 130400 Net operating income in planning budget = 138600-130400 = 8200
Sathre Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. Fixed Element per MonthVariable Element per Well ServicedRevenue $4,500Employee salaries and wages$56,400 $900Servicing materials $700Other expenses$35,400 When the company prepared its planning budget at the beginning of December, it assumed that 34 wells would have been serviced. However, 32 wells were actually serviced during December. The "Employee salaries and wages" in the flexible budget for December would have been closest to:
85200 (56400+(900*32))
Lightsey Natural Dying Corporation measures its activity in terms of skeins of yarn dyed. Last month, the budgeted level of activity was 14,800 skeins and the actual level of activity was 15,100 skeins. The company's owner budgets for dye costs, a variable cost, at $0.51 per skein. The actual dye cost last month was $8,660. In the company's flexible budget performance report for last month, what would have been the spending variance for dye costs?
959 U the spending variance for dye costs=(the actual level of activity*variable cost)-The actual dye cost =(15,100*$0.51)-$8,660 =$959 U
In a flexible budget, what will happen to fixed costs as the activity level increases?
The fixed cost per unit will decrease
An activity variance is the difference between an actual revenue or cost and the revenue or cost in the flexible budget that is adjusted for the actual level of activity of the period.
False
If activity is higher than expected, total fixed costs should be higher than expected. If activity is lower than expected, total fixed costs should be lower than expected.
False
An unfavorable activity variance for revenue indicates that activity was less than expected when the static planning budget was developed.
True
In a flexible budget, when the activity declines, the total variable cost also declines.
True
The activity variance for revenue is favorable if the revenue in the flexible budget exceeds the revenue in the static planning budget.
True
T or F: A spending variance is the difference between the amount of the cost in the static planning budget and the amount of the cost in the flexible budget.
false
T or F: A favorable spending variance occurs when the actual cost is less than the amount of the cost in the static planning budget.
false
T or F: A flexible budget performance report contains activity variances but not revenue or spending variances.
false
T or F: Comparing a static planning budget to actual costs is not a good way to assess whether variable costs are under control.
true