# CH10 - 1 Lauter Printing uses two measures of activity...

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1. Lauter 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 \$5,300 per month plus \$480 per press run plus \$1,080 per book set-up. The company expected its activity in October to be 169 press runs and 64 book set-ups, but the actual activity was 167 press runs and 60 book set-ups. The actual cost for wages and salaries in October was \$155,690. The spending variance for wages and salaries in October would be closest to: A) \$5,430 U B) \$150 U C) \$5,430 F D) \$150 F Feedback: Since the actual expense is greater than the flexible budget, the variance is unfavorable (U) 2. Whetstine 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 September, the kennel budgeted for 3,200 tenant- days, but its actual level of activity was 3,180 tenant-days. The kennel has provided the following data concerning the formulas to be used in its budgeting: The net operating income in the flexible budget for September would be closest to: A) \$8,548 B) \$4,967 C) \$5,029 D) \$8,720 3. Barringer Manufacturing Corporation has prepared the following overhead budget for next month.

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The company's variable overhead costs are driven by machine-hours. What would be the total budgeted overhead cost for next month if the activity level is 7,900 machine-hours rather than 7,800 machine-hours? A) \$110,710.00 B) \$109,620.00 C) \$110,868.00 D) \$111,025.38 Feedback: Variable cost per machine-hour = (\$34,320 + \$50,700) 7,800 machine-hours = \$10.90 per machine-hour (\$10,200 + \$5,600 + \$8,800) + (\$10.90 x 7,900) = \$110,710.00 4. Buffaloe Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During August, the company budgeted for 5,200 units, but its actual level of activity was 5,250 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for August:
A) \$53,919 B) \$55,525 C) \$52,896 D) \$55,460 Feedback: \$48,700 + \$1.30 x 5,250 = \$55,525 5. Dwelmont Hotel bases its budgets on guest-days. The hotel's static budget for May appears below: The total cost at the activity level of 2,800 guest-days per month should be: A) \$95,200 B) \$86,230 C) \$85,300 D) \$78,200 Feedback: Total fixed cost = \$27,830 + \$17,710 = \$45,540 Total cost = [(\$8.30 + \$5.90) x 2,800] + \$45,540 = \$85,300 6. Genito Corporation's static planning budget for October appears below. The company bases its budgets on machine-hours.

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CH10 - 1 Lauter Printing uses two measures of activity...

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