Question

10 Which of the following statements is true? A f activity is higher than expected total expected, total fixed costs should be lower than expectes desta shehehe sts should be higher than expected. I activity is lower than than expected ked costs should not be included in a rsible budest because they do not change changes, lexible budget because they do not change when the level of activity A revenue variance is favorable if th i c hen ther e in the master statie planning e variance is favorable if the stunl budget D. A spending varia Pending variance is the difference between the amount of the cost in the master statie planning) budget and the amount of the cost in the flexible budget ad s tual costs should be compared to what the costs should To help assess how well a manager has have been for the actual level of activity Il Grant Grant Corporation's flexible budet gost formula for wülitics a variable cost, is $0.60 per unit of output. The company's performance report for last month shows a 5800 unfavorable spending variance for utilities 2 2 costs 18,000 units of output were produced last month, then the actual variable incurred for utilities for the month must have been A $ 4,000 B S 4,800 $ 3,360 D $ 5,600 E. None of the above

Answer 1

Ans. 10	Option E
	Explanation: Actual costs should be compared to flexible budget which is prepared on the actual
	level of activity.
	Revenue and spending variance is the difference between actual results and flexible budget.
	Fixed cost always remains constant, but it should be included in a flexible budget.
Ans. 11	Option D   $5,600
	Unfavorable spending variance for utilities means actual utilities expenses are higher than the
	utilities expenses of flexible budget.
	Flexible budget for utilities = Actual units produced * Utilities cost per unit
	8,000 * $0.60   =   $4,800
	Unfavorable spending variance = Actual utilities - Flexible utilities
	$800 = Actual utilities - $4,800
	Actual utilities = $4,800 + $800
	Actual utilities = $5,600