When a flexible budget is used a decrease in the actual production level within a relevant range would?
When using a flexible budget, a decrease in production levels within a relevant range: a. decreases variable cost per unit.
What will happen to fixed costs in a flexible budget as the activity level increases?
In a flexible budget, what will happen to fixed costs as the activity level increases? The fixed cost per unit will decrease. The main difference between a flexible budget and a static budget is that the static budget is not adjusted for changes in the level of activity.
What is the purpose of the flexible budget?
A flexible budget adjusts to changes in actual revenue levels. Actual revenues or other activity measures are entered into the flexible budget once an accounting period has been completed, and it generates a budget that is specific to the inputs. The budget is then compared to actual expenses for control purposes.
Why is it imperative that we flex the budget to adjust for actual level of activity?
A flexible budget flexes the static budget for each anticipated level of production. This flexibility allows management to estimate what the budgeted numbers would look like at various levels of sales.
Do fixed costs change in a flexible budget?
The flexible budget amount for fixed overhead does not change with changes in production, so this amount remains the same regardless of actual production.
When using a flexible budgeting system the computation for the variable overhead spending variance is the difference between?
The flexible budget is compared to actual costs, and the difference is shown in the form of two variances. The variable overhead spending variance represents the difference between actual costs for variable overhead and budgeted costs based on the standards.
Which of the following is the usual starting point for the master budget?
Question: The sales budget is the starting point for the master budget, as shown in Figure 9.1 “Master Budget Schedules”. What is a sales budget, and how is it prepared? Answer: The sales budget is an estimate of units of product the organization expects to sell times the expected sales price per unit.
How do you create a flexible budget?
The following are steps you can take to create a flexible budget for your business:
- Identify which costs are variable and which costs are fixed. Fixed costs typically include expenses such as rent and monthly marketing costs.
- Divide the budget.
- Create your budget with set fixed costs.
- Update the budget.
- Input and compare.
Which of the following is an advantage of standard costing?
Advantages and disadvantages of using standard costs
Improved cost control. More useful information for managerial planning and decision making. More reasonable and easier inventory measurements. Cost savings in record-keeping.
What does a flexible budget look like?
In its simplest form, the flex budget uses percentages of revenue for certain expenses, rather than the usual fixed numbers. Consequently, a more sophisticated format will also incorporate changes to many additional expenses when certain larger revenue changes occur, thereby accounting for step costs.
What are 5 expenses that are flexible?
Flexible expense examples include groceries, dining out, entertainment, and even utilities.
Here are some examples of variable essential costs:
- Cell Phone Plans.
- Internet Services.
- Transportation Costs (gas, level of insurance coverage, etc.)
When should flexible budget be used?
For costs that vary with volume or activity, the flexible budget will flex because the budget will include a variable rate per unit of activity instead of one fixed total amount. In short, the flexible budget is a more useful tool when measuring a manager’s efficiency.
What are three fundamental activities in a standard cost system?
The three fundamental activities in standard cost system are the following: standard setting, actual cost accumulation and variance analysis.
What is the link between flexible budgeting and management control?
What is the link between flexible budgeting and management control? This system is designed for inhouse or internal managers and their decision making. Cost accounting information is not needed for comparison with other companies.
What are the two different components of raw material variances?
Material Cost Variance can be due to less purchase price being paid than the standard or because of change in the quantity of material used. Thus, Material Cost Variance is made up of two components namely; Material Price Variance and Material Usage Variance.