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Exam 9: Flexible Budgets and Performance Analysis

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Question 41

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Palmerton Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for December. When the company prepared its planning budget at the beginning of December, it assumed that 40 wells would have been serviced. However, 45 wells were actually serviced during December.The variance for net operating income in the Revenue and Spending Variances column of a report comparing actual results to the flexible budget for December would have been closest to:

A) $10,500 F
B) $10,500 U
C) $1,000 F
D) $1,000 U

E) A) and B)
F) A) and C)

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Question 42

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Malander 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 November, the kennel budgeted for 3,400 tenant-days, but its actual level of activity was 3,390 tenant-days. The kennel has provided the following data concerning the formulas used in its budgeting and its actual results for November:Data used in budgeting: Actual results for November: The wages and salaries in the planning budget for November would be closest to:

A) $21,006
B) $20,667
C) $20,606
D) $21,060

E) None of the above
F) A) and D)

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Question 43

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Furney Clinic uses patient-visits as its measure of activity. During May, the clinic budgeted for 3,400 patient-visits, but its actual level of activity was 3,000 patient-visits. The clinic bases its budgets on the following information: Revenue should be $38.00 per patient-visit. Personnel expenses should be $36,000 per month plus $10.80 per patient-visit. Medical supplies should be $1,000 per month plus $6.00 per patient-visit. Occupancy expenses should be $9,300 per month plus $2.00 per patient-visit. Administrative expenses should be $5,500 per month plus $0.30 per patient-visit. The clinic reported the following actual results for May: Required:Prepare the clinic's flexible budget performance report for May. Label each variance as favorable (F) or unfavorable (U).

The activity variance for revenue is favorable if the revenue in the flexible budget exceeds the revenue in the static planning budget.

Speyer Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,160 patient-visits and the actual level of activity was 1,150 patient-visits. The cost formula for administrative expenses is $4.00 per patient-visit plus $22,000 per month. The actual administrative expense was $22,300. In the clinic's flexible budget performance report for last month, the spending variance for administrative expenses was:

Lochner Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for June. When the company prepared its planning budget at the beginning of June, it assumed that 24 wells would have been serviced. However, 26 wells were actually serviced during June.The activity variance for revenue for June would have been closest to:

The activity variance for expenses in October would be:

Rogstad Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During March, the company budgeted for 6,700 units, but its actual level of activity was 6,670 units. The company has provided the following data concerning the formulas to be used in its budgeting: The activity variance for selling and administrative expenses in March would be closest to:

Schriever Corporation is an oil well service company that measures its output by the number of wells serviced. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. The planning budget for May was based on 36 wells serviced, but a total of 31 wells were actually serviced in May.The activity variance for revenue for May would have been closest to:

Duprey Clinic uses client-visits as its measure of activity. During January, the clinic budgeted for 2,200 client-visits, but its actual level of activity was 2,150 client-visits. The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:Data used in budgeting: Actual results for January: The net operating income in the planning budget for January would be closest to:

Neeb Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During January, the company budgeted for 7,000 units, but its actual level of activity was 7,040 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for January:Data used in budgeting: Actual results for January: The activity variance for selling and administrative expenses in January would be closest to:

Brong Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for March. When the company prepared its planning budget at the beginning of March, it assumed that 22 containers would have been refurbished. However, 18 containers were actually refurbished during March.The spending variance for "Other expenses" for March would have been closest to:

Fixed costs should usually be included in performance reports because fixed costs are generally controllable.

Rizzio Tech is a for-profit vocational school. The school bases its budgets on two measures of activity (i.e., cost drivers), namely student and course. The school uses the following data in its budgeting: In September, the school budgeted for 1,820 students and 173 courses. The actual activity for the month was 2,020 students and 178 courses.Required:Prepare the school's planning budget for September.

Benjamin Corporation is a shipping container refurbishment company that measures its output by the number of containers refurbished. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes. When the company prepared its planning budget at the beginning of March, it assumed that 26 containers would have been refurbished. However, 23 containers were actually refurbished during March.The amount shown for "Refurbishing materials" in the planning budget for March would have been closest to:

Differences between the static planning budget and the flexible budget show what should have happened because the actual level of activity differed from what had been planned.

Harold Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During March, the company budgeted for 7,900 units, but its actual level of activity was 7,860 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for March:Data used in budgeting: Actual results for March: The manufacturing overhead in the flexible budget for March would be closest to:

Ruozzo Corporation is a service company that measures its output by the number of customers served. The company has provided the following fixed and variable cost estimates that it uses for budgeting purposes and the actual results of operations for July. When the company prepared its planning budget at the beginning of July, it assumed that 27 customers would have been served. However, 22 customers were actually served during July.The "Employee salaries and wages" in the flexible budget for July would have been closest to:

Speyer Medical Clinic measures its activity in terms of patient-visits. Last month, the budgeted level of activity was 1,530 patient-visits and the actual level of activity was 1,490 patient-visits. The cost formula for administrative expenses is $4.00 per patient-visit plus $15,300 per month. The actual administrative expense was $19,810. In the clinic's flexible budget performance report for last month, the spending variance for administrative expenses was:

Lenci Corporation manufactures and sells a single product. The company uses units as the measure of activity in its budgets and performance reports. During May, the company budgeted for 5,120 units, but its actual level of activity was 5,070 units. The company has provided the following data concerning the formulas used in its budgeting and its actual results for May:Data used in budgeting: Actual results for May: The spending variance for manufacturing overhead in May would be closest to: