T MC Practice Key

Question 1

Which of the following statements is true? (Multiple correct answers)

A planning budget is prepared before the start of the period and is for a planned level of activity

A planning budget is prepared after the start of the period and is for the actual level of activity

A flexible budget is prepared before the start of the period and is for a planned level of activity

A flexible budget is prepared during the period and is for the actual level of activity

Answer 1

A planning budget is prepared before the start of the period and is for a planned level of activity

A flexible budget is prepared during the period and is for the actual level of activity

Question 2

Which of the following is a favorable change

Increase in wages
Decrease in office supplies expense
Increase in equipment maintenance
Decrease in revenue

Answer 2

Decrease in office supplies expense

Question 3

A five-star hotel buys bouquets of flowers to decorate its common areas and guest rooms. Its flexible budget for flowers in $350 per day of operations plus $6.50 per room-day. If this month the hotel operated for 30 days and it had 7,680 room-days, what would be the flexible budget amount for flowers for the month?
a. $56,720
b. $58,420
c. $60,420
d. $62,720

Answer 3

c. $60,420

Flexible: Common Flower Expense + Room Daily Expense
= ($350/day * 30 days) + ($6.50/room-day * 7,680)
= $10,500 + $49,920 = $60,420

Question 4

Refer to the last question. If the actual spending on flowers for the month was $60,000 and the hotel originally budgeted for 30 operating days and 7,500 room-days, what was the spending variance for the month.
750 F
750 U
420 F
420 U

Answer 4

420 F

Actual – Flexible = $60,000 - $60,420 = -420 = 420 F
Since this is a spending (expense) variance, a decrease is F