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Exam 9: Flexible Budgets and Performance Analysis

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Question 131

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Courington Detailing's cost formula for its materials and supplies is $2,420 per month plus $9 per vehicle. For the month of August, the company planned for activity of 63 vehicles, but the actual level of activity was 33 vehicles. The actual materials and supplies for the month was $2,840. Why such a great disparity between the planned and actual level of activity from 63 to 33 vehicles - should these be closer together? Please keep as is. -The materials and supplies in the planning budget for August would be closest to:

A) $5,422
B) $2,840
C) $2,987
D) $2,717

E) A) and D)
F) B) and C)

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Question 132

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Schoening 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 and the actual results of operations for January. When the company prepared its planning budget at the beginning of January, it assumed that 40 containers would have been refurbished. However, 38 containers were actually refurbished during January. -The amount shown for revenue in the planning budget for January would have been closest to:

A) $158,600
B) $166,947
C) $164,000
D) $155,800

E) B) and C)
F) C) and D)

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Question 133

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Tessmer Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During January, the kennel budgeted for 3,100 tenant-days, but its actual level of activity was 3,090 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for January: Data used in budgeting: Actual results for January: -The net operating income in the flexible budget for January would be closest to:

Difabio Tech is a for-profit vocational school.The school bases its budgets on two measures of activity (i.e.,cost drivers),namely student and course.The school uses the following data in its budgeting: In June,the school budgeted for 1,070 students and 90 courses.The actual activity for the month was 1,370 students and 95 courses. Required: Prepare the school's flexible budget for the actual level of activity in June.

Dubberly Corporation's cost formula for its manufacturing overhead is $30,600 per month plus $64 per machine-hour. For the month of March, the company planned for activity of 7,900 machine-hours, but the actual level of activity was 7,880 machine-hours. The actual manufacturing overhead for the month was $558,610. -The spending variance for manufacturing overhead in March would be closest to:

Korsak 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. The planning budget for October was based on serving 23 customers, but a A total of 19 customers were actually served during October. The Planning budget units is missing and affects the calculations of the subsequent questions. -The activity variance for "Employee salaries and wages" for October would have been closest to:

At Rost Corporation,indirect labor is a variable cost that varies with direct labor-hours.Last month's performance report showed that actual indirect labor cost totaled $7,540 for the month and that the associated spending variance was $560 F.If 10,800 direct labor-hours were actually worked last month,then the flexible budget cost formula for indirect labor must be (per direct labor-hour) closest to:

Bartosiewicz Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 3,500 client-visits, but its actual level of activity was 3,490 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January: Data used in budgeting: Actual results for January: -The net operating income in the planning budget for January would be closest to:

Rhed Kennel uses tenant-days as its measure of activity; an animal housed in the kennel for one day is counted as one tenant-day. During December, the kennel budgeted for 3,700 tenant-days, but its actual level of activity was 3,650 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for December: Data used in budgeting: Actual results for December: -The facility expenses in the flexible budget for December would be closest to:

Fixed costs should not be ignored when evaluating how well a manager has controlled costs.

Brookings 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. When the company prepared its planning budget at the beginning of August,it assumed that 34 wells would have been serviced. Required: Prepare the company's planning budget for August.

Dure Corporation's cost formula for its selling and administrative expense is $24,500 per month plus $1 per unit. For the month of July, the company planned for activity of 7,200 units, but the actual level of activity was 7,160 units. The actual selling and administrative expense for the month was $31,460. -The spending variance for selling and administrative expense in July would be closest to:

Rients 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 and the actual results of operations for October. When the company prepared its planning budget at the beginning of October, it assumed that 39 customers would have been served. However, 44 customers were actually served during October. -The revenue variance in the Revenue and Spending Variances column of a report comparing actual results to the flexible budget for October would have been closest to:

Lawes Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During July, the company budgeted for 5,000 units, but its actual level of activity was 5,050 units. The company has provided the following data concerning the formulas to be used in its budgeting: -The direct labor in the planning budget for July would be closest to:

Stegemann 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 and the actual results of operations for May. When the company prepared its planning budget at the beginning of May, it assumed that 27 containers would have been refurbished. However, 29 containers were actually refurbished during May. -The activity variance for total expenses for May would have been closest to:

Teel Printing uses two measures of activity, press runs and book set-ups, in the cost formulas in its budgets and performance reports. The cost formula for wages and salaries is $8,850 per month plus $400 per press run plus $950 per book set-up. The company expected its activity in July to be 204 press runs and 111 book set-ups, but the actual activity was 201 press runs and 110 book set-ups. The actual cost for wages and salaries in July was $193,780. -The spending variance for wages and salaries in July would be closest to:

Fixed costs should not be included in a flexible budget because they do not change when the level of activity changes.

Duprey Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 2,200 client-visits, but its actual level of activity was 2,150 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January: Data used in budgeting: Actual results for January: -The administrative expenses in the planning budget for January would be closest to:

During September,Ferman Clinic budgeted for 3,800 patient-visits,but its actual level of activity was 4,100 patient-visits.The clinic uses the following revenue and cost formulas in its budgeting,where q is the number of patient-visits: Revenue: $21.60q Personnel expenses: $22,600 + $6.60q Medical supplies: $1,000 + $2.60q Occupancy expenses: $6,000 + $0.90q Administrative expenses: $4,300 + $0.30q Required: Prepare the clinic's flexible budget for September based on the actual level of activity for the month.

Varcoe Corporation bases its budgets on the activity measure customers served.During September,the company planned to serve 30,000 customers,but actually served 25,000 customers.Revenue is $3.80 per customer served.Wages and salaries are $34,100 per month plus $1.20 per customer served.Supplies are $0.50 per customer served.Insurance is $8,300 per month.Miscellaneous expenses are $6,400 per month plus $0.20 per customer served. Required: Prepare a report showing the company's activity variances for September.Indicate in each case whether the variance is favorable (F)or unfavorable (U).