Flexible budgets question answers
11. Flexible budgets
All the following are true of flexible budgets EXCEPT that they:
- Use the same flexible (variable) cost per unit as the master budget.
- Result in higher total costs for greater levels of production.
- Allow comparison of actual results to targets based on the achieved level of production.
- Reflect the same level of production as the master budget
- 12. ABC
Which of the following is a sign that an ABC system may be useful?
- there are small amounts of support costs.
- Products make diverse demands on resources because of differences in volume, process steps, batch size, or complexity.
- Products a company is less suited to produce and sell show small profits.
Operations throughout the plant are fairly similar.
- . Efficiency Variance
Apple Valley Orchards, Inc (AVO), developed standard costs for direct material and direct labor. in 2008, AVO estimated the following standard costs for one of their most well-loved products , the AVO classic Grandma’s large apple pie which had a brown sugar coating on the top of the crust as well as including cranberry and mince ingredients in addition to the apples .
|Budgeted quantity||Budgeted price|
|Direct materials||1.5 pounds||$ 7.25 per pound|
|Direct labor||0.25||$ 14. 00 per hour|
During September AVO produced and sold 1,200 pies using 1,875 pounds of direct materials at an average cost per pound of $ 7,00 and 280 direct labor hours at an average wage of $ 14.25 per hour.
13. What is AVO’s Labor Efficiency Variance for September 2008.
- $ 70 unfavourable
- $ 280 favourable
- 20 hours
- $ 280 unfavourable
- 14. Decision making
14. Which of the following would NOT be considered on a make-or-buy decision?
- Capacity-related costs that will no longer be incurred
- Flexible costs of production
- Potential rental income from space occupied by the production area
- Unchanged supervisory costs.
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