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 a. is another name for management by exception. b. is developed at the end of the period. c. is based on the budgeted level of output. d. provides favorable operating results. Answer : b Difficulty : 1 Objective : 1 44. Management by exception is the practice of concentrating on a. the master budget. b. areas not operating as anticipated. c. favorable variances. d. unfavorable variances. Answer: b Difficulty: 1 Objective: 1 45. A variance is a. the gap between an actual result and a benchmark amount. b. the required number of inputs for one standard output. c. the difference between an actual result and a budgeted amount. d. the difference between a budgeted amount and a standard amount. 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 a. budgeted costs are less than actual 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. Chapter 7 Page 1
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Answer : b Difficulty : 2 Objective : 1 Chapter 7 Page 2
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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? a. $20,000 favorable b. $20,000 unfavorable c. $2,000 favorable d. $2,000 unfavorable 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? a. $1,200 favorable b. $18,800 unfavorable c. $20,000 favorable d. $1,200 unfavorable 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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THE FOLLOWING INFORMATION APPLIES TO QUESTIONS 51 THROUGH 53. Bates Corporation used the following data to evaluate their current operating system.
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ch07tif-2 - CHAPTER 7: FLEXIBLE BUDGETS, VARIANCES, AND...

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