ACCT 202 Chapter 21: Acct Chapter 21

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4 Apr 2016

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Management uses budgets to monitor and control operations. Compare actual with budget and analyze any differences. Prepared for a single planned level of activity. Performance evaluations can be difficult when the actual level of activity differs from planned level. Shoe revenues and expenses that should have occurred at the actual level of activity. May be prepared for any activity level in the relevant range. Reveal variances due to good cost control or lack of cost control. The flex a budget for different activity levels, we must know how costs behave with changes in activity levels. Total variable costs change in direct proportion to changes in activity. Total fixed costs remain unchanged within the relevant range. Total variable cost = . 80 per unit * budget level in units. Fixed costs are expressed as a total amount that does not change within the relevant range of activity. Favorable sales variance indicates that the average selling price was greater that.

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I need some feedback if these are correct.
1.
A flexible budget is a budget that:
A) is updated with actual costs as they occur during theperiod.
B) is updated to reflect the actual level of activity during theperiod.
C) is prepared using a computer spreadsheet application.
D) contains only variable production costs.
2.
Ofarrell Snow Removal's cost formula for its vehicle operating costis $1,840 per month plus $377 per snow-day. For the month ofNovember, the company planned for activity of 14 snow-days, but theactual level of activity was 19 snow-days. The actual vehicleoperating cost for the month was $9,280. The vehicle operating costin the flexible budget for November would be closest to:
A) $9,003
B) $7,118
C) $9,280
D) $9,660
3.
Entler Framing's cost formula for its supplies cost is $2,250 permonth plus $16 per frame. For the month of June, the companyplanned for activity of 502 frames, but the actual level ofactivity was 497 frames. The actual supplies cost for the month was$10,580. The supplies cost in the planning budget for June would beclosest to:
A) $10,580
B) $10,282
C) $10,686
D) $10,202
4.
Johannsen Catering uses two measures of activity, jobs and meals,in the cost formulas in its budgets and performance reports. Thecost formula for catering supplies is $310 per month plus $103 perjob plus $23 per meal. A typical job involves serving a number ofmeals to guests at a corporate function or at a host's home. Thecompany expected its activity in February to be 28 jobs and 187meals, but the actual activity was 26 jobs and 192 meals. Theactual cost for catering supplies in February was $7,620. Thecatering supplies in the flexible budget for February would beclosest to:
A) $7,495
B) $7,404
C) $7,620
D) $6,960
5.
Kimbril Catering uses two measures of activity, jobs and meals, inthe cost formulas in its budgets and performance reports. The costformula for catering supplies is $530 per month plus $91 per jobplus $12 per meal. A typical job involves serving a number of mealsto guests at a corporate function or at a host's home. The companyexpected its activity in January to be 27 jobs and 174 meals, butthe actual activity was 31 jobs and 173 meals. The actual cost forcatering supplies in January was $5,330. The activity variance forcatering supplies in January would be closest to:
A) $255 F
B) $255 U
C) $352 F
D) $352 U
6.
Lapinsky Air uses two measures of activity, flights and passengers,in the cost formulas in its budgets and performance reports. Thecost formula for plane operating costs is $31,400 per month plus$2,148 per flight plus $7 per passenger. The company expected itsactivity in April to be 89 flights and 261 passengers, but theactual activity was 84 flights and 260 passengers. The actual costfor plane operating costs in April was $204,810. The spendingvariance for plane operating costs in April would be closestto:
A) $8,842 U
B) $19,589 F
C) $19,589 U
D) $8,842 F
7.
Velten Corporation's flexible budget performance report for lastmonth shows that actual indirect materials cost, a variable cost,was $45,198 and that the spending variance for indirect materialscost was $9,114 favorable. During that month, the company worked18,600 machine-hours. Budgeted activity for the month had been19,000 machine-hours. The cost formula per machine-hour forindirect materials cost must have been closest to:
A) $1.90
B) $2.86
C) $1.94
D) $2.92
8.
Which of the following comparisons best isolates the impact thatchanges in prices of inputs and outputs have on performance?
A) static planning budget and flexible budget
B) static planning budget and actual results
C) flexible budget and actual results
D) master budget and static planning budget
9.
The excess or deficiency of cash available over disbursements onthe cash budget is calculated as follows:
A) The beginning balance less the expected cash receipts less theexpected cash disbursements.
B) The cash available less the expected cash receipts plus theexpected cash disbursements.
C) The beginning balance plus the expected cash receipts less theexpected cash disbursements.
D) None of the above.
10.
There are various budgets within the master budget. One of thesebudgets is the production budget. Which of the following BESTdescribes the production budget?
A) It details the required direct labor hours.
B) It details the required raw materials purchases.
C) It is calculated based on the sales budget and the desiredending inventory.
D) It summarizes the costs of producing units for the budgetperiod.
1.B
2.A
3.A
4.C
5.D
6.C
7.A
8.B
9.A
10.C

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Several years ago, Westmont Corporation developed acomprehensive budgeting system for planning and control purposes.While departmental supervisors have been happy with the system, thefactory manager has expressed considerable dissatisfaction with theinformation being generated by the system.

A typical departmental cost report for a recent periodfollows:

Assembly Department Cost Report For the Month Ended March 31
	Actual Results		Planning Budget		Variances
Machine-hours		50,000		55,000
Variable costs:
Supplies	$	48,950	$	52,250	$	3,300	F
Scrap		32,400		33,000		600	F
Indirect materials		82,800		88,000		5,200	F
Fixed costs:
Wages and salaries		89,250		90,000		750	F
Equipment depreciation		70,000		70,000		â
Total cost	$	323,400	$	333,250	$	9,850	F

After receiving a copy of this cost report, the supervisor ofthe Assembly Department stated, âThese reports are super. It makesme feel really good to see how well things are going in mydepartment. I canât understand why those people upstairs complainso much about the reports.â

For the last several years, the companyâs marketing departmenthas chronically failed to meet the sales goals expressed in thecompanyâs monthly budgets.

Required:

1. The companyâs president is uneasy about the cost reports,what can be the reason? (You may select more than oneanswer. Single click the box with the question mark to produce acheck mark for a correct answer and double click the box with thequestion mark to empty the box for a wrong answer.)

	Cost reports are ineffective sincebudgeted costs at one level of activity are compared to actualcosts at another level of activity.
	Cost reports show whether fixedcosts are controlled and do not show whether variable costs arecontrolled.
	Cost reports are effective sincebudgeted costs at one level of activity are compared to actualcosts at another level of activity.
	Cost reports show whether fixedcosts and variable costs are controlled.

2. What kind of reports should be used to give better insightinto how well departmental supervisors are controlling costs?

	Flexible budget performance reportsmust be used
	Fixed budget performance reportsmust be used

3. Complete the new performance report for the quarter, based onFlexible Budget Performance approach. (Indicate the effectof each variance by selecting "F" for favorable, "U" forunfavorable, and "None" for no effect (i.e., zero variance). Inputall amounts as positive values.)

4. Were costs well controlled in March?

chocolateworm132

1. The selling and administrative expense budget of SpurlockCorporation is based on budgeted unit sales, which are 6,300 unitsfor February. The variable selling and administrative expense is$9.30 per unit. The budgeted fixed selling and administrativeexpense is $118,440 per month, which includes depreciation of$19,530 per month. The remainder of the fixed selling andadministrative expense represents current cash flows. The cashdisbursements for selling and administrative expenses on theFebruary selling and administrative expense budget should be:
A) $98,910
B) $157,500
C) $58,590
D) $177,030

2.
Guthridge Inc. is working on its cash budget for February. Thebudgeted beginning cash balance is $26,000. Budgeted cash receiptstotal $104,000 and budgeted cash disbursements total $100,000. Thedesired ending cash balance is $40,000. To attain its desiredending cash balance for February, the company needs toborrow:
A) $0
B) $10,000
C) $40,000
D) $70,000

3.
A flexible budget:
A) classifies budget requests by activity and estimates thebenefits arising from each activity.
B) presents a statement of expectations for a period of time butdoes not present a firm commitment.
C) presents the plan for only one level of activity and does notadjust to changes in the level of activity.
D) presents the plan for a range of activity so that the plan canbe adjusted for changes in activity levels.

4.
Johnson's Snow Removal's cost formula for its vehicle operatingcost is $1,240 per month plus $348 per snow-day. For the month ofDecember, the company planned for activity of 12 snow-days, but theactual level of activity was 14 snow-days. The actual vehicleoperating cost for the month was $6,330. The vehicle operating costin the planning budget for December would be closest to:
A) $5,426
B) $6,112
C) $5,416
D) $6,330

5.
Corporation uses activity based costing and has three activitypools: Batch Setup, Order Processing, and Product Assembly. Thecompany uses the following activity rates from its activity-basedcosting to assign overhead costs to products: Batch Setup - $93.62per batchOrder Processing - $19.25 per orderProduct Assembly -$2.15 per assembly hourData concerning two products appearbelow:Product X60R - number of batches - 59, number of orders - 11,number of assembly hours - 687Product G96Y - number of batches -15, number of orders - 7, number of assembly hours - 716How muchoverhead cost would be assigned to Product X60R using theactivity-based costing system?
A) $5,523.58
B) $87,070.14
C) $115.02
D) $7,212.38

6.Corporation uses an activity-based costing system with threeactivity cost pools (Assembly, Setting Up and Other). The companyhas provided the following data concerning its costs: Wages -$240,000, Depreciation - $200,000, Utilities - $100,000.Distribution of these costs across the activity pools is asfollows: Wages (Assembly - 40%, Setting Up - 40%, Other - 20%),Depreciation (Assembly - 20%, Setting Up - 45%, Other - 35%),Utilities (Assembly - 35%, Setting Up - 40%, Other - 25%).How muchcost, in total, would be allocated in the first-stage allocation tothe Other activity cost pool?
A) $143,000
B) $144,000
C) $108,000
D) $135,000

7.
Which of the following statements is true for a company that usesvariable costing?
A) The unit product cost changes because of changes in the numberof units manufactured.
B) Profit fluctuates with sales.
C) Any underapplied overhead is included in the product cost.
D) Product costs include variable administration costs.

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ACCT 202 Chapter 21: Acct Chapter 21

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