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Chapter11.Flexible Budgeting and the Management of Overhead and Support Activity Costs

Chapter11.Flexible Budgeting and the Management of Overhead and Support Activity Costs

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Chapter 11: Flexible Budgeting and the Management of Overhead and Support Activity Costs MULTIPLE CHOICE QUESTIONS 1. A static budget: A. is based totally on prior year's costs. B. is based on one anticipated activity level. C. is based on a range of activity. D. is preferred over a flexible budget in the evaluation of performance. E. presents a clear measure of performance when planned activity differs from actual activity. Answer: B LO: 1 Type: RC 2. Flexible budgets reflect a company's anticipated costs based on variations in: 3. A flexible budget: 4. Interstate Merchandising anticipated selling 29,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 31,500 units and $182,700, respectively. If the company used a static budget for performance evaluations, Interstate would report a cost variance of: Chapter 11 47
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5. Main Street Merchandising anticipated selling 24,000 units of a major product and paying sales commissions of $5 per unit. Actual sales and sales commissions totaled 23,600 units and $120,360, respectively. If the company used a flexible budget for performance evaluations, Main Street would report a cost variance of: A. $360U. B. $360F. C. $2,360U. D. $2,360F. E. some other amount not listed above. Answer: C LO: 1 Type: A 6. Badger Bakeries anticipated making 17,000 fancy cakes during a recent period, requiring 14,000 hours of process time. Each hour of process time was expected to cost the firm $11. Actual activity for the period was higher than anticipated: 18,000 cakes and 15,200 hours. If each hour of process time actually cost Badger $12, what process-time variance would be disclosed on a performance report that incorporated static budgets and flexible budgets? Static Flexible
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