Multiple Choice Quiz (2024)

1
A major weakness of static budgets is that:A)they are geared only to a single level of activity.B)they cannot be used to assess whether variable costs are under control.C)they force the manager to compare actual costs at one level of activity to budgeted costs at a different level of activity.D)all of the above.2
Kevin's Bar & Grill compares monthly operating results with a static budget prepared at the beginning of the year. When actual sales are less than budget, the restaurant would usually report favorable variances on:A)fixed supervisory salaries and variable food costs.B)variable food costs but not fixed supervisory salaries.C)fixed supervisory salaries but not variable food costsD)neither fixed supervisory salaries or variable food costs3
Which of the following statements is correct?A)a.Unfavorable cost variances always indicate bad performance.B)b.Favorable cost variances always indicate good performance.C)c.Both of the above statements are correct.D)d.Neither of the above statements are correct.4
An activity variance is the difference between:A)a revenue or cost item in the static planning budget and the same item in the flexible budget.B)how much the revenue should have been, given the actual level of activity, and the actual revenue for the period.C)how much a cost should have been, given the actual level of activity, and the actual amount of the cost.D)none of the above.5
A company's static budget estimate of total overhead costs was $400,000 based on the assumption that 20,000 units would be produced and sold. The company estimates that 30% of its overhead is variable and the remainder is fixed. What would be the total overhead cost according to the flexible budget if 24,000 units were produced and sold?A)$384,000B)$400,000C)$424,000D)$464,0006
If the actual cost incurred is greater than what the cost should have been as set forth in the flexible budget, the variance is:A)labeled as favorable.B)labeled as unfavorable.C)cannot be labeled as favorable or unfavorable without obtaining an explanation.D)an activity variance.7
If the average selling price is greater than expected, the revenue variance is:A)labeled as favorable.B)labeled as unfavorable.C)cannot be labeled as favorable or unfavorable without obtaining an explanation.D)an activity variance.8
Which of the following statements is not correct?A)To generate a favorable variance for net operating income in a business that serves customers managers must take actions to increase client-visits.B)To generate a favorable overall revenue and spending variance, managers must take actions to protest selling pricesC)Flexible budget performance reports provide useful more useful information to managers than a simple comparison of budgeted to actual results.D)A flexible budget performance report separates the effects of how well prices were controlled and operations were managed.9
Let q₁ represents client visits and q₂ represents hours of operations. The electricity cost for Jamie's Hair Salon depends on both client-visits and the hours of operations and its cost formula is $400 + $0.10q₁ + 2.00 q₂. If the actual number of client visits is 800 and the salon was open for 200 hours during the month, the flexible budget amount for electricity is:A)$840B)$880C)$2,080D)$2,02010
Which of the following statements is not correct?A)A flexible budget allows managers to isolate activity variances and revenue and spending variances.B)One of the common errors in preparing performance reports is to implicitly assume that all costs are fixed.C)One of the common errors in preparing performance reports is to implicitly assume that all costs are variable.D)Comparing static planning budget costs to actual costs only makes sense if the cost is variable.