What is the primary difference between a static budget and a flexible budget Mcq?

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Flexible Budgets MCQs
Frequently Asked Questions
What is the primary difference between a static and flexible budget?
What is the difference between flexible budget and flexed budget?
What is the difference between a flexible budget and a planning also called static budget what are each used for?
What is flexible budget Mcq?

Flexible Budgets MCQs

Take this quick test on flexible budgets to help you prepare for your exams and interviews. The quiz will allow you to assess your knowledge and see how well you’ve understood the key topics and concepts.

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Frequently Asked Questions

What is a Flexible Budget?

A Flexible Budget estimates future costs and revenues that can be adjusted to reflect changes in the level of activity.

How do you create a Flexible Budget?

Flexible Budgets can help managers better understand how activity levels change impact costs and revenues. They can also help managers make better decisions about where to allocate resources.

How do you create a Flexible Budget?

Are there any drawbacks to using a Flexible Budget?

There are no significant drawbacks to using a Flexible Budget. However, it is essential to note that a Flexible Budget should not be used in place of sound Financial Planning. Instead, a Flexible Budget should be used as a tool to help managers respond to fluctuations inactivity but should not be relied upon to make decisions about the future organizational activity.

What are the types of Flexible Budgets?

There are two types of Flexible Budgets: static and rolling. With a static budget, the company sets a specific budget amount for each period, regardless of how much revenue or expenses actually vary from month to month. A rolling budget, on the other hand, adjusts automatically as actual revenue and expenses change from one month to the next. This type of budget is more responsive to actual business conditions, but it can be more difficult to track and manage.

The cost accountant for Carlos Candies, Inc. prepared the following static budget based on expected activity of 2,000 units:

Revenues$64,000
Variable Costs (34,000)
Contribution Margin 30,000
Fixed Costs (18,000)
Net Income$12,000

If Carlos actually produced 2,200 units, the flexible budget would show fixed costs amounting to -$19,800.
-$18,000.
-$52,000.
-none of the above.

Amanda Manufacturing Company prepared the following static budget income statement:

Revenues$125,000
Variable Costs (75,000)
Contribution Margin 50,000
Fixed Costs (30,000)
Net Income$20,000

The budgeted costs were based on a planned sales volume of 5,000 units. Actual production was 6,000 units.

The amount of net income based on a flexible budget of 6,000 units would have been
$24,000.
$26,000.
$30,000.
$45,000.

The following information was drawn from the accounting records of Ashton Company.

Budgeted $5,000, ActualSales$6,000
Cost of Goods Sold (3,000), Actual (3,600)
Gross Margin 2,000, Actual 2,400
Variable Cost (1,000), Actual (1,200)
Fixed Cost (500), Actual (400)
Net Income$500, Actual $800

Based on this information Ashton Company has a

Multiple Choice
$300 favorable sales variance
$300 unfavorable sales variance
$1,000 favorable sales variance
$1,000 unfavorable sales variance

The following information was drawn from the accounting records of Ashton Company.

Based on this information Ashton Company has a

Multiple Choice
$200 favorable variable operating cost variance
$200 unfavorable variable operating cost variance
$100 favorable variable operating cost variance
$100 unfavorable variable operating cost variance

The following information was drawn from the accounting records of Ashton Company.

Based on this information Ashton Company has a
Multiple Choice
$200 favorable fixed operating cost variance
$200 unfavorable fixed operating cost variance
$100 favorable fixed operating cost variance
$100 unfavorable fixed operating cost variance

The following information was drawn from the accounting records of Smith Company

Static Budget $10,000/ Flexible Budget $12,000/ Actual Result $12,700
Cost of Goods Sold (6,000)/ FB (7,200)/ AR (6,900)
Gross Margin 4,000/ FB 4,800/ AR 5,800
Variable Cost (2,000)/FB (2,400)/ AR (2,600)
Fixed Cost (1,000)/FB (1,000)/ AR (1,300)
Net Income $1,000/ FB $1,400/ AR $1,900

Based on this information the

Multiple Choice
sales price flexible budget variance is a $2,700 unfavorable variance.
sales price flexible budget variance is a $700 favorable variance.
sales price flexible budget variance is a $2,700 favorable variance.
sales price flexible budget variance is a $2,000 favorable variance.

The following information was drawn from the accounting records of Smith Company

Based on this information the
Multiple Choice
cost of goods sold flexible budget variance is a $300 unfavorable variance.
cost of goods sold volume variance is a $300 favorable variance.
cost of goods sold flexible budget variance is a $1,200 favorable variance.
cost of goods sold volume variance is a $1,200 unfavorable variance.

The following information was drawn from the accounting records of Smith Company

Based on this information the

Multiple Choice
variable operating cost volume variance is a $400 favorable variance.
variable operating cost flexible budget variance is a $200 unfavorable variance.
variable operating cost volume variance is a $200 favorable variance.
variable operating cost flexible budget variance is a $400 favorable variance.

The sales volume variance is defined as the difference between
-the static budget sales, based on actual volume, and flexible budget sales, based on planned volume.
-the static budget sales, based on planned volume, and flexible budget sales, based on planned volume.
-the static budget sales, based on actual volume, and flexible budget sales, based on actual volume.
-the static budget sales, based on planned volume, and flexible budget sales, based on actual volume.

Kelfour Enterprises has divided its operations into two divisions. Relevant accounting data for each division is as follows:

DivisionsSales Operating Assets Operating IncomeWestern Division$150,000 $100,000 $15,000 Eastern Division$300,000 $150,000 $16,500

Kelfour has an additional $50,000 of funds to invest. The manager of the Western Division believes that she can invest the funds at a rate of return (ROI) of 14% while the manager of the Eastern Division has found a new investment opportunity that is expected to yield a 12% ROI. Kelfour uses residual income (RI) to evaluate managerial performance. The company wide desired ROI is 10%. Based on this information
Multiple Choice
The manager of the Western Division would accept the $50,000 additional investment opportunity because it would increase the Division's RI by $2,000.
The manager of the Eastern Division would accept the $50,000 additional investment opportunity because it would increase the Division's RI by $2,000.
The CEO would be indifferent because the $50,000 additional investment would increase the RI of the company as a whole regardless of which Division receives the additional investment.
All of the answers represent true statements.

What is the primary difference between a static and flexible budget?

Static vs Flexible Budgets Static Budget - the budget is prepared for only one level of production volume. Also called a Master budget. Flexible Budget - a summarized budget that can easily be computed for several different production volume levels. Separates variable costs from fixed costs.

What is the difference between flexible budget and flexed budget?

Flexible vs flexed budget Flexible budgeting happens at the beginning of a budgeting period—revenue, costs, and profit are forecast across a range of activity levels. With this information, a flexed budget can then be created at the end of the budget period based on the actual activity level.

What is the difference between a flexible budget and a planning also called static budget what are each used for?

The flexible budget allows the organization to respond to changes in demand over time, making it useful for planning incremental demands in labor, raw materials, and run rates. A static budget remains unchanged for the duration of the period and does not take changes in cyclical or seasonal demands into consideration.