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Tutorial Chapter 8

The document provides sample questions and information about flexible budgeting, including true/false questions about planning budgets, variances, and flexible budget calculations. It includes a case study about a company, Kaaihue Detailing, with questions calculating variances given costs formulas and different activity levels. It also provides a multiple part question to calculate a flexible budget performance report for a company based on activity and spending variances.

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832 views3 pages

Tutorial Chapter 8

The document provides sample questions and information about flexible budgeting, including true/false questions about planning budgets, variances, and flexible budget calculations. It includes a case study about a company, Kaaihue Detailing, with questions calculating variances given costs formulas and different activity levels. It also provides a multiple part question to calculate a flexible budget performance report for a company based on activity and spending variances.

Uploaded by

fitrieyfiey
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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BT12203 BUSINESS ACCOUNTING

CHAPTER 8: FLEXIBLE BUDGETING

TUTORIAL QUESTIONS

1. A planning budget is prepared before the period begins and is valid for only the planned level
of activity.
TRUE OR FALSE

2. An unfavorable activity variance for a cost indicates that spending was higher than it should
have been for the actual level of activity for the period. 
TRUE OR FALSE

3. The activity variance for revenue is unfavorable if the actual revenue for the period is less
than the revenue in the static planning budget. 
TRUE OR FALSE

4. If the actual level of activity is 4% more than planned, then the fixed costs in the static
budget should be increased by 4% before comparing them to actual costs. 
TRUE OR FALSE

The following information is for question 5 until 8:

Kaaihue Detailing's cost formula for its materials and supplies is $2,750 per month plus $17 per
vehicle. For the month of April, the company planned for activity of 95 vehicles, but the actual
level of activity was 135 vehicles. The actual materials and supplies for the month was $4,850.
 
5. The materials and supplies in the planning budget for April would be closest to: 
A. $4,850
B. $5,045
C. $3,413
D. $4,365

6. The materials and supplies in the flexible budget for April would be closest to: 
A. $6,203
B. $4,850
C. $4,365
D. $5,045
 
7. The activity variance for materials and supplies in April would be closest to: 
A. $680 U
B. $485 F
C. $680 F
D. $485 U
 
8. The spending variance for materials and supplies in April would be closest to: 
A. $195 F
B. $485 F
C. $195 U
D. $485 U

9. Squillace Corporation uses customers served as its measure of activity. During October, the
company budgeted for 38,000 customers, but actually served 35,000 customers. The
company has provided the following data concerning the formulas used in its budgeting and
its actual results for October:

   

Required:
Prepare the company's flexible budget performance report for October (calculate both
activity variances and revenue and spending variances). Label each variance as favorable (F)
or unfavorable (U). Use the templates given below.
Answers:
Squillace Corporation
Flexible Budget Performance Report Part 1
For the Month Ended October 31
Planning Activity Flexible
Budget Variances (F/U) Budget
Customers served (Q) 38000 35000

Revenues ($3.80Q) 144400 11400 (U) 133000


Expenses:
Wages and salaries ($35,400 + $1.20Q) 81000 3600 (F) 77400
Supplies ($0.60Q) 22800 1800 (F) 21000
Insurance 10600 0 10600
Miscellaneous ($7,200 + $0.40Q) 22400 1200 (F) 21200
Total expenses 136800 6600 (F) 130200
Net operating income 7600 4800 (U) 2800

Squillace Corporation
Flexible Budget Performance Report Part 2
For the Month Ended October 31
Flexible Revenue & Actual
Budget Spending Budget
Variances (F/U)
Customers served (Q) 35000 35000

Revenues ($3.80Q) 133000 2100 (U) 130900


Expenses:
Wages and salaries ($35,400 + $1.20Q) 77400 1700 (F) 75700
Supplies ($0.60Q) 21000 300 (U) 21300
Insurance 10600 400 (F) 10200
Miscellaneous ($7,200 + $0.40Q) 21200 2300 (U) 23500
Total expenses 130200 500 (U) 130700
Net operating income 2800 2600 (U) 200

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