BEC 2 Budgeting

Question 1

Attainable standards

Answer 1

Currently attainable standards represent costs that result from work performed by employees with appropriate training and experience but without extraordinary effort.

Question 2

Ideal standards

Answer 2

Costs that result from perfect efficiency and effectiveness in job performance.

Question 3

Flexible budget

Answer 3

A flexible budget is a budget that can be adjusted to any activity level, it shows how costs vary with production volume.

Budget total costs
= (Variable cost per unit x activity level) + fixed costs

Fixed costs in total are constant over the relevant range of activity level.

Question 4

Master budget

Answer 4

A master budget documents specific short term operating performance goals for a period of time, normally one year or less. The plan generally includes an operating (non financial) budget as well as a financial budget.

Question 5

Operating budgets included in the master budget

Answer 5

Sales budget
Production budget
Direct materials budget
Direct labor budget
Overhead budget
Cost of goods sold budget
SG&A budget

Question 6

Financial budgets included in the master budget

Answer 6

Cash budget

Pro forma financial statements

Question 7

Direct materials price variance

Answer 7

Actual quantity purchased x (Actual price - Standards price)

Question 8

Direct materials quantity usage variance

Answer 8

Standard price x (Actual quantity - Standard quantity)

Question 9

Direct labor rate difference

Answer 9

Actual labor hours x (Actual rate - Standard rate)

Question 10

Direct labor efficiency variance

Answer 10

Standard price x (Actual hours - Standard hours)

Question 11

Manufacturing overhead variances

One way

Answer 11

Overhead variance = Actual OH - Applied OH

Question 12

Manufacturing overhead variance

Two way

Answer 12

Budget variance = Actual OH - ( Budgeted FOH + (Std DLH x Std VOH rate))

Volume variance = (Budgeted FOH + (Std DLH x Std VOH rate)) - Applied OH

Question 13

Manufacturing overhead variance

Three way

Answer 13

Spending variance = Actual OH - ( Budgeted FOH + (Actual DLH x Std VOH rate))

Efficiency variance = (Budgeted FOH + ( Actual DLH x Std VOH rate)) - (Budgeted FOH + (Std DLH x Std VOH rate))

Volume variance = (Budgeted FOH + (std DLH x Std VOH rate)) - Applied OH

Question 14

Volume variance

Answer 14

Budgeted fixed overhead - Applied fixed overhead

OR

(Actual production in units - Budgeted production in units) x Per unit standard fixed overhead rate

Question 15

Efficiency variance

Answer 15

(Actual DLH - Standard DLH allowed) x Standard variable overhead rate

Question 16

Market size variance

Answer 16

(Actual market size - Expected market size) x Budgeted market share % x Budgeted contribution margin per unit

Question 17

Market share variance

Answer 17

(Actual market share % - Budgeted market share %) x Actual industry units x Budgeted contribution margin per unit

Question 18

Sales volume variance

Answer 18

(Actual sold units - Budgeted sales units) x Standard contribution margin per unit

Question 19

Selling price variance

Answer 19

((Actual SP/Unit) - (Budgeted SP/Unit)) x Actual sold units

Question 20

Contribution by SBU

Answer 20

The difference between the contribution margin (Revenue - Variable costs) and controllable fixed costs (those costs that managers can impact in less than one year)

Question 21

Balanced scorecard

Answer 21

The balanced scorecard displays performance relative to critical success factors identified for multiple dimensions of a business operations

Question 22

Balanced scorecard dimensions

Answer 22

Finance
Internal business process
Customer satisfaction
Advancement of human resources innovation

Question 23

Types of responsibility segments that are used to establish business performance measures

Answer 23

Cost SBU - managers are held responsible for controlling costs

Revenue SBU - managers responsible for generating revenues

Profit SBU - managers responsible for producing a target profit

Investment SBU - managers responsible for return on investment