MGT 6655 SU17 EXAM QUESTIONS
AND ANSWERS ALL CORRECT
Which one of the following statements regarding the difference between a flexible
budget and a static budget is true? - Answer- A flexible budget provides cost allowances
for different levels of activity, whereas a static budget provides costs for one level of
activity.
Barnes Corporation expected to sell 150,000 board games during the month of
November, and the company's master budget contained the following data related to the
sale and production of these games:
Revenue: $2,400,000
Cost of goods sold:
Direct materials: 675,000
Direct labor: 300,000
Variable overhead: 450,000
Contribution margin: $ 975,000
Fixed overhead: 250,000
Fixed selling and administration: 500,000
Operating income: $ 225,000
Actual sales during November were 180,000 games. Using a flexible budget, the
company expects the operating income for the month of November to be - Answer-
$420,000
Revenue of $2,400,000 reflects a unit selling price of $16 ($2,400,000 ÷ 150,000
games). The contribution margin is $975,000, or $6.50 per game ($975,000 ÷ 150,000
games). Increasing sales will result in an increased contribution margin of $195,000
(30,000 games × $6.50). Assuming no additional fixed costs, net income will increase to
$420,000 ($225,000 originally reported + $195,000).
When preparing a performance report for a cost center using flexible budgeting
techniques, the planned cost column should be based on the - Answer- Budget adjusted
to the actual level of activity for the period being reported.
, Which one of the following budgeting methodologies would be most appropriate for a
firm facing a significant level of uncertainty in unit sales volumes for next year? -
Answer- Flexible budgeting.
Comparing actual results with a budget based on achieved volume is possible with the
use of a - Answer- Flexible budget
A plan that is created using budgeted revenue and costs but is based on the actual
units of output is known as a - Answer- Flexible budget.
A manufacturing firm has certain peak seasons, namely the Christmas season, the
summer season, and the last 2 weeks of February. During these periods of increased
output, the firm leases additional production equipment and hires additional temporary
employees. Which of the following budget techniques would best fit this firm's needs? -
Answer- Flexible budget.
Compared with static budgets, flexible budgets - Answer- Offer managers a more
realistic comparison of budget and actual revenue and cost items under their control.
Country Ovens is a family restaurant chain. Due to an unexpected road construction
project, traffic passing by the Country Ovens restaurant in Newtown has significantly
increased. As a result, restaurant volume has similarly increased well beyond the level
expected. Which type of budget would be most appropriate in helping the restaurant
manager plan for restaurant labor costs? - Answer- Flexible budget.
A static budget contains which of the following amounts? - Answer- Budgeted costs for
budgeted output.
RedRock Company uses flexible budgeting for cost control. RedRock produced 10,800
units of product during October, incurring indirect materials costs of $13,000. Its master
budget for the year reflected indirect materials costs of $180,000 at a production volume
of 144,000 units. A flexible budget for October production would reflect indirect
materials costs of - Answer- $13,500
Flexible budgets - Answer- Accommodate changes in activity levels.
XYZ Company is using flexible budgeting to analyze its operating performance for this
year. It concludes that the flexible budget variance for sales revenue is $20,000
unfavorable and the sales-volume variance is $22,000 favorable. Which of the following
is most likely to be true based on this information?
1. Actual sales units > budgeted sales units.
2. Actual unit price < budgeted unit price.
3. Actual cost of good sold > budgeted cost of good sold. - Answer- 1 & 2
AND ANSWERS ALL CORRECT
Which one of the following statements regarding the difference between a flexible
budget and a static budget is true? - Answer- A flexible budget provides cost allowances
for different levels of activity, whereas a static budget provides costs for one level of
activity.
Barnes Corporation expected to sell 150,000 board games during the month of
November, and the company's master budget contained the following data related to the
sale and production of these games:
Revenue: $2,400,000
Cost of goods sold:
Direct materials: 675,000
Direct labor: 300,000
Variable overhead: 450,000
Contribution margin: $ 975,000
Fixed overhead: 250,000
Fixed selling and administration: 500,000
Operating income: $ 225,000
Actual sales during November were 180,000 games. Using a flexible budget, the
company expects the operating income for the month of November to be - Answer-
$420,000
Revenue of $2,400,000 reflects a unit selling price of $16 ($2,400,000 ÷ 150,000
games). The contribution margin is $975,000, or $6.50 per game ($975,000 ÷ 150,000
games). Increasing sales will result in an increased contribution margin of $195,000
(30,000 games × $6.50). Assuming no additional fixed costs, net income will increase to
$420,000 ($225,000 originally reported + $195,000).
When preparing a performance report for a cost center using flexible budgeting
techniques, the planned cost column should be based on the - Answer- Budget adjusted
to the actual level of activity for the period being reported.
, Which one of the following budgeting methodologies would be most appropriate for a
firm facing a significant level of uncertainty in unit sales volumes for next year? -
Answer- Flexible budgeting.
Comparing actual results with a budget based on achieved volume is possible with the
use of a - Answer- Flexible budget
A plan that is created using budgeted revenue and costs but is based on the actual
units of output is known as a - Answer- Flexible budget.
A manufacturing firm has certain peak seasons, namely the Christmas season, the
summer season, and the last 2 weeks of February. During these periods of increased
output, the firm leases additional production equipment and hires additional temporary
employees. Which of the following budget techniques would best fit this firm's needs? -
Answer- Flexible budget.
Compared with static budgets, flexible budgets - Answer- Offer managers a more
realistic comparison of budget and actual revenue and cost items under their control.
Country Ovens is a family restaurant chain. Due to an unexpected road construction
project, traffic passing by the Country Ovens restaurant in Newtown has significantly
increased. As a result, restaurant volume has similarly increased well beyond the level
expected. Which type of budget would be most appropriate in helping the restaurant
manager plan for restaurant labor costs? - Answer- Flexible budget.
A static budget contains which of the following amounts? - Answer- Budgeted costs for
budgeted output.
RedRock Company uses flexible budgeting for cost control. RedRock produced 10,800
units of product during October, incurring indirect materials costs of $13,000. Its master
budget for the year reflected indirect materials costs of $180,000 at a production volume
of 144,000 units. A flexible budget for October production would reflect indirect
materials costs of - Answer- $13,500
Flexible budgets - Answer- Accommodate changes in activity levels.
XYZ Company is using flexible budgeting to analyze its operating performance for this
year. It concludes that the flexible budget variance for sales revenue is $20,000
unfavorable and the sales-volume variance is $22,000 favorable. Which of the following
is most likely to be true based on this information?
1. Actual sales units > budgeted sales units.
2. Actual unit price < budgeted unit price.
3. Actual cost of good sold > budgeted cost of good sold. - Answer- 1 & 2
