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ch07tif-2 - CHAPTER 7 FLEXIBLE BUDGETS VARIANCES AND...

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CHAPTER 7: FLEXIBLE BUDGETS, VARIANCES, AND MANAGEMENT CONTROL: I MULTIPLE CHOICE 42. The master budget is a. a flexible budget. b. a static budget. c. developed at the end of the period. d. based on the actual level of output. Answer : b Difficulty : 1 Objective : 1 43. A flexible budget Answer : b Difficulty : 1 Objective : 1 44. Management by exception is the practice of concentrating on 45. A variance is Answer : c Difficulty : 1 Objective : 1 46. An unfavorable variance indicates that a. actual costs are less than budgeted costs. b. actual revenues exceed budgeted revenues. c. the actual amount decreased operating income relative to the budgeted amount. d. all of the above are true. Answer : c Difficulty : 2 Objective : 1 47. A favorable variance indicates that Chapter 7 Page 1

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Answer : b Difficulty : 2 Objective : 1 Chapter 7 Page 2
THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 48 THROUGH 50. Abernathy Corporation used the following data to evaluate their current operating system. The company sells items for \$10 each and used a budgeted selling price of \$10 per unit. Actual Budgeted Units sold 92,000 units 90,000 units Variable costs \$450,800 \$432,000 Fixed costs \$ 95,000 \$100,000 48 . What is the static-budget variance of revenues? Answer : a Difficulty : 2 Objective : 1 (92,000 units x \$10) - (90,000 units x \$10) = \$20,000 F 49. What is the static-budget variance of variable costs? Answer : b Difficulty : 2 Objective : 1 \$450,800 - \$432,000 = \$18,800 U 50 . What is the static-budget variance of operating income? a. \$3,800 favorable b. \$3,800 unfavorable c. \$6,200 favorable d. \$6,200 unfavorable Answer : c Difficulty : 2 Objective : 1 Actual Static Static-budget Results Budget Variance Units sold 92,000 90,000 Revenues \$920,000 \$900,000 \$20,000 F Variable costs 450,800 432,000 18,800 U Contribution margin \$469,200 \$468,000 \$1,200 F Fixed costs 95,000 100,000 (5,000 ) F Operating income \$374,200 \$368,000 \$6,200 F Chapter 7 Page 3

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