Managerial Accounting Quiz: Flexible Budgets
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Flexible BudgetsQuestion 1 of 20

A manufacturing company's static budget for April was based on producing 10,000 units. During April, the company actually produced 12,000 units. The static budget included the following cost information:

  • Direct materials: $6.00 per unit
  • Direct labor: $4.00 per unit
  • Variable manufacturing overhead: $2.50 per unit
  • Fixed manufacturing overhead: $50,000 per month
  • Selling and administrative expenses: $20,000 per month (fixed) plus sales commissions of $1.00 per unit sold.

Assuming the company sold all units produced, what would be the total budgeted cost on a flexible budget for April?

$200,000
$217,000
$232,000
$244,000
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Managerial Accounting Quiz

Managerial Accounting Quiz: Flexible Budgets

Practice Flexible Budgets in Managerial Accounting with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Flexible Budgets, giving you a quick way to practice the rules, question types, and explanations that matter most for Managerial Accounting.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

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Question 1

A manufacturing company's static budget for April was based on producing 10,000 units. During April, the company actually produced 12,000 units. The static budget included the following cost information:

  • Direct materials: $6.00 per unit
  • Direct labor: $4.00 per unit
  • Variable manufacturing overhead: $2.50 per unit
  • Fixed manufacturing overhead: $50,000 per month
  • Selling and administrative expenses: $20,000 per month (fixed) plus sales commissions of $1.00 per unit sold.

Assuming the company sold all units produced, what would be the total budgeted cost on a flexible budget for April?

  1. $200,000
  2. $217,000
  3. $232,000 (correct answer)
  4. $244,000
Explanation: A flexible budget adjusts the static budget for the actual level of activity. The calculation requires flexing the variable costs and keeping fixed costs the same.
  1. Calculate total variable cost per unit: $6.00 (materials) + $4.00 (labor) + $2.50 (variable OH) + $1.00 (commissions) = $13.50 per unit.
  2. Calculate total variable costs for the actual activity level: $13.50 per unit * 12,000 units = $162,000.
  3. Identify total fixed costs: $50,000 (fixed OH) + $20,000 (fixed S&A) = $70,000.
  4. Calculate total flexible budget cost: $162,000 (total variable) + $70,000 (total fixed) = $232,000.

Question 2

Dexter Industries' static budget for manufacturing overhead costs is based on direct labor hours (DLH). It includes variable overhead at a rate of $4.00 per DLH and fixed overhead of $60,000 per period. The static budget for June was based on 30,000 DLH. In June, the company actually worked 33,000 DLH and incurred total overhead of $195,000.

What is the flexible budget for total manufacturing overhead in June?

  1. $180,000
  2. $192,000 (correct answer)
  3. $195,000
  4. $198,000
Explanation: The flexible budget calculation should use the actual activity level with the predetermined cost formula. Actual costs and static budget totals for the original activity level are distractors.
  1. Calculate budgeted variable overhead: Variable rate * Actual activity = $4.00 per DLH * 33,000 DLH = $132,000.
  2. Identify budgeted fixed overhead: The fixed overhead is $60,000 regardless of the activity level within the relevant range.
  3. Calculate total flexible budget overhead: $132,000 (variable) + $60,000 (fixed) = $192,000.

Question 3

A company is preparing a flexible budget for its selling and administrative (S&A) expenses. S&A expenses consist of sales commissions (5% of sales revenue), executive salaries (120,000perquarter),andmarketingcosts(120,000 per quarter), and marketing costs (50,000 per quarter plus $5 for every unit sold). The static budget for Q1 was based on sales of 20,000 units at a price of $40 per unit. Actual sales for Q1 were 24,000 units at the same price.

What is the total flexible budget for S&A expenses for Q1?

  1. $338,000
  2. $310,000
  3. $358,000
  4. $388,000 (correct answer)
Explanation: The flexible budget for S&A expenses must be calculated by applying the cost formulas for each component to the actual activity level of 24,000 units sold.
  1. Calculate actual sales revenue: 24,000 units * $40/unit = $960,000.
  2. Calculate flexible budget sales commissions: 5% * $960,000 = $48,000.
  3. Calculate flexible budget marketing costs: 50,000+(50,000 + (5/unit * 24,000 units) = $50,000 + $120,000 = $170,000.
  4. Identify fixed executive salaries: $120,000.
  5. Sum the components: $48,000 + $170,000 + $120,000 = $388,000.

Question 4

For the upcoming year, Rylin Corp. has budgeted production costs for 40,000 units. At this level, variable costs are budgeted at $160,000 and fixed costs at $100,000. During the first month, the company produced 4,000 units.

What is the total flexible budget for production costs for the first month?

  1. $26,000
  2. $31,000
  3. $16,000
  4. $24,333 (correct answer)
Explanation: The flexible budget for the month must be based on the monthly portion of fixed costs and the variable cost for the actual units produced.
  1. Calculate the variable cost per unit: $160,000 / 40,000 units = $4 per unit.
  2. Calculate the total variable cost for the month: $4 per unit * 4,000 units = $16,000.
  3. Calculate the fixed cost for one month: The $100,000 fixed cost is for the year. Monthly fixed cost = $100,000 / 12 months = $8,333.33.
  4. Calculate the total flexible budget for the month: $16,000 (variable) + $8,333.33 (fixed) = $24,333.33.

Question 5

A company uses a flexible budget for its indirect labor costs, which are a mixed cost. The cost formula is $15,000 per month plus $2.50 per direct labor hour. The static budget for the year was based on 120,000 total direct labor hours. In March, the company actually worked 9,500 direct labor hours.

What is the flexible budget amount for indirect labor for March?

  1. $40,000
  2. $42,500
  3. $37,500
  4. $38,750 (correct answer)
Explanation: The flexible budget applies the cost formula to the actual activity level for the period in question (March). The annual static budget information is extraneous.
  1. Identify the cost formula: Cost = 15,000+(15,000 + (2.50 * Direct Labor Hours).
  2. Identify the actual activity for March: 9,500 direct labor hours.
  3. Calculate the flexible budget: 15,000+(15,000 + (2.50 * 9,500) = $15,000 + $23,750 = $38,750.

Question 6

A company has two main types of overhead: one driven by machine hours (MH) and the other by the number of production setups. The flexible budget formulas are:

  • Machine-driven overhead: $50,000 per month + $12 per MH
  • Setup-driven overhead: $20,000 per month + $500 per setup

The static budget for August was based on 10,000 MH and 80 setups. Actual activity in August was 11,000 MH and 75 setups.

What is the total flexible budget for overhead for August?

  1. $230,000
  2. $227,500
  3. $242,000
  4. $239,500 (correct answer)
Explanation: The flexible budget must be calculated for each overhead pool using its own activity driver's actual level.
  1. Calculate flexible budget for machine-driven overhead: 50,000+(50,000 + (12 per MH × 11,000 actual MH) = $50,000 + $132,000 = $182,000.
  2. Calculate flexible budget for setup-driven overhead: 20,000+(20,000 + (500 per setup × 75 actual setups) = $20,000 + $37,500 = $57,500.
  3. Calculate total flexible budget overhead: $182,000 + $57,500 = $239,500.

Question 7

A company budgeted its electricity cost, a mixed cost, at $40,000 for a month where it expected to use 50,000 machine hours. The cost formula for electricity is $10,000 per month plus $0.60 per machine hour. Actual usage was 55,000 machine hours and the actual electricity bill was $44,000.

What is the electricity cost that would appear on the flexible budget?

  1. $40,000
  2. $44,000
  3. $43,000 (correct answer)
  4. $33,000
Explanation: The flexible budget is calculated by applying the cost formula to the actual level of activity. The static budget amount and the actual cost incurred are distractors.
  1. Identify the cost formula: Cost = 10,000+(10,000 + (0.60 * Machine Hours).
  2. Identify the actual activity level: 55,000 machine hours.
  3. Calculate the flexible budget amount: 10,000+(10,000 + (0.60 * 55,000) = $10,000 + $33,000 = $43,000.

Question 8

A company uses a flexible budget for its shipping department. The budget formula for shipping costs is $28,000 per month plus $1.50 per package shipped. The static budget for May was based on a volume of 40,000 packages. In May, the company shipped 38,000 packages and incurred actual shipping costs of $86,500.

What is the total shipping cost that should appear in the company's flexible budget for May?

  1. $88,000
  2. $85,000 (correct answer)
  3. $86,500
  4. $85,500
Explanation: The flexible budget is prepared using the actual level of activity. The static budget information and actual cost incurred are distractors.
  1. Identify the cost formula: Total Cost = 28,000+(28,000 + (1.50 * Packages Shipped).
  2. Identify the actual activity level: 38,000 packages.
  3. Apply the formula: 28,000+(28,000 + (1.50 * 38,000) = $28,000 + $57,000 = $85,000.

Question 9

Vexel Corporation's master budget for the year was based on production of 100,000 units. The standard cost sheet shows that total manufacturing cost per unit is $45, which includes $10 of fixed manufacturing overhead applied per unit. In the first quarter, the company actually produced 28,000 units.

What is the total flexible budget for manufacturing costs for the first quarter?

  1. $1,260,000
  2. $1,230,000 (correct answer)
  3. $980,000
  4. $1,125,000
Explanation: The key is to correctly handle the fixed manufacturing overhead. The per-unit fixed cost is based on the master budget volume and should not be used to budget costs at a different activity level.
  1. Calculate total fixed manufacturing overhead for the year: $10/unit * 100,000 units = $1,000,000.
  2. Calculate fixed manufacturing overhead for one quarter: $1,000,000 / 4 quarters = $250,000.
  3. Calculate the variable manufacturing cost per unit: $45 (total) - $10 (fixed) = $35 per unit.
  4. Calculate total variable costs for the quarter: $35/unit * 28,000 units = $980,000.
  5. Calculate total flexible budget manufacturing cost: $980,000 (variable) + $250,000 (fixed) = $1,230,000.

Question 10

A hospital's static budget for its laboratory is based on 8,000 tests per month. Costs for this level of activity are as follows:

  • Technician salaries: $90,000 (fixed)
  • Test kits & supplies: $160,000 (variable)
  • Equipment maintenance: $44,000 (mixed)

The hospital's controller has determined the cost formula for equipment maintenance is $20,000 per month plus $3.00 per test. In the most recent month, the lab performed 9,000 tests.

What is the total cost in the laboratory's flexible budget for the month?

  1. $294,000
  2. $317,000 (correct answer)
  3. $314,000
  4. $297,000
Explanation: The flexible budget must be calculated for each cost element based on the actual activity level of 9,000 tests.
  1. Technician salaries (fixed): This cost does not change with activity. Flexible budget amount = $90,000.
  2. Test kits & supplies (variable): First, find the per-unit cost from the static budget: $160,000 / 8,000 tests = $20 per test. Then, calculate the flexible budget amount: $20 per test * 9,000 tests = $180,000.
  3. Equipment maintenance (mixed): Apply the given cost formula to the actual activity level: 20,000+(20,000 + (3.00 per test * 9,000 tests) = $20,000 + $27,000 = $47,000.
  4. Total flexible budget cost: Sum the budgeted amounts: $90,000 + $180,000 + $47,000 = $317,000.

Question 11

Sterling Manufacturing Co. budgeted for production of 5,000 units in June. Actual production was 6,000 units. The company's static budget for manufacturing costs was as follows:

  • Direct Materials: $50,000
  • Direct Labor: $40,000
  • Variable Overhead: $15,000
  • Fixed Overhead: $30,000

What is the total amount of manufacturing cost that would appear in a flexible budget for June?

  1. $135,000
  2. $156,000 (correct answer)
  3. $162,000
  4. $153,000
Explanation: The flexible budget adjusts variable costs for the actual level of production while keeping total fixed costs constant.
  1. Calculate total variable costs in the static budget: $50,000 (DM) + $40,000 (DL) + $15,000 (VOH) = $105,000.
  2. Calculate the variable cost per unit: $105,000 ÷ 5,000 units = $21 per unit.
  3. Calculate total variable costs for the flexible budget: $21 per unit × 6,000 actual units = $126,000.
  4. Add fixed costs (which remain constant): $126,000 + $30,000 = $156,000.

Question 12

A company produces a single product. The static budget for May was based on production of 8,000 units. The budgeted income statement at this level is as follows:

Sales (8,000 units @ 50).....50).....400,000 Variable Costs.....................$240,000 Contribution Margin.............$160,000 Fixed Costs........................$100,000 Operating Income..................$60,000

Actual production and sales for May were 9,000 units.

What is the total contribution margin that would be shown on a flexible budget for May?

  1. $160,000
  2. $170,000
  3. $180,000 (correct answer)
  4. $200,000
Explanation: The flexible budget recalculates revenues and variable costs for the actual level of activity. The contribution margin is the difference between these two flexed amounts.
  1. Calculate the budgeted contribution margin per unit from the static budget: $160,000 / 8,000 units = $20 per unit.
  2. Calculate the total contribution margin for the flexible budget using the actual activity level: $20 per unit * 9,000 units = $180,000. Alternatively:
  3. Sales price per unit = $400,000 / 8,000 = $50.
  4. Variable cost per unit = $240,000 / 8,000 = $30.
  5. Flexible budget sales = $50 * 9,000 = $450,000.
  6. Flexible budget variable costs = $30 * 9,000 = $270,000.
  7. Flexible budget contribution margin = $450,000 - $270,000 = $180,000.

Question 13

A company's flexible budget formula for total manufacturing costs is $500,000 per month plus $75 per unit. The static budget was prepared for a volume of 10,000 units. The company actually produced 9,000 units.

In a flexible budget prepared for the actual production volume, how does the budgeted total manufacturing cost per unit compare to the budgeted cost per unit in the static budget?

  1. It is higher than the static budget per-unit cost. (correct answer)
  2. It is lower than the static budget per-unit cost.
  3. It is the same as the static budget per-unit cost.
  4. It cannot be determined without knowing actual costs.
Explanation: This question tests the understanding of how average fixed costs affect total cost per unit when activity levels change.
  1. Static budget per-unit cost:
    • Total Cost = 500,000+(500,000 + (75 * 10,000) = $1,250,000
    • Cost per unit = $1,250,000 / 10,000 units = $125.00
  2. Flexible budget per-unit cost:
    • Total Cost = 500,000+(500,000 + (75 * 9,000) = $1,175,000
    • Cost per unit = $1,175,000 / 9,000 units = $130.56
  3. Comparison: The flexible budget cost per unit (130.56)ishigherthanthestaticbudgetcostperunit(130.56) is higher than the static budget cost per unit (125.00). This is because the same amount of fixed cost is spread over fewer units.

Question 14

Gorham Corp. has a static budget based on 25,000 units. At this activity level, total budgeted costs are $400,000, of which 60% are variable. The company actually produced 28,000 units.

What is the total flexible budget amount?

  1. $428,800 (correct answer)
  2. $448,000
  3. $428,000
  4. $400,000
Explanation: This problem requires separating the total static budget cost into its variable and fixed components and then flexing the variable portion to the new activity level.
  1. Calculate total variable and fixed costs in the static budget:
    • Variable Costs = $400,000 × 60% = $240,000
    • Fixed Costs = $400,000 × 40% = $160,000
  2. Calculate the variable cost per unit: $240,000 ÷ 25,000 units = $9.60 per unit.
  3. Calculate total variable costs for the flexible budget: $9.60 per unit × 28,000 units = $268,800.
  4. Calculate total flexible budget: $268,800 (variable) + $160,000 (fixed) = $428,800.

Question 15

At 10,000 machine hours, a company's flexible budget for factory utilities is $38,000. At 15,000 machine hours, the flexible budget for the same cost is $52,000. What would be the total flexible budget amount for factory utilities at 12,000 machine hours?

  1. $42,800
  2. $43,600 (correct answer)
  3. $45,000
  4. $40,400
Explanation: This problem requires determining the cost formula (variable and fixed components) from two data points and then applying it to a new activity level.
  1. Calculate the variable rate per machine hour: (Cost at high activity - Cost at low activity) / (High activity - Low activity) = ($52,000 - $38,000) / (15,000 - 10,000) = $14,000 / 5,000 hours = $2.80 per machine hour.
  2. Calculate the fixed cost: Total cost at low point - (Variable rate * Low activity) = 38,000−(38,000 - (2.80 * 10,000) = $38,000 - $28,000 = $10,000.
  3. Calculate the flexible budget for 12,000 hours: Fixed Cost + (Variable Rate * 12,000 hours) = 10,000+(10,000 + (2.80 * 12,000) = $10,000 + $33,600 = $43,600.

Question 16

Crestline Services provides maintenance for corporate clients. The company's static budget for the most recent month was based on 4,000 service hours. At this level of activity, budgeted maintenance supplies were $18,000. For the same month, at an activity level of 5,000 service hours, the company's flexible budget showed $21,000 for maintenance supplies. During the month, the company actually worked 4,800 service hours.

What is the flexible budget amount for maintenance supplies at the actual activity level of 4,800 service hours?

  1. $20,400 (correct answer)
  2. $20,160
  3. $19,800
  4. $21,600
Explanation: This is a multi-step problem that requires first determining the cost formula for the mixed cost (maintenance supplies) using the high-low method, and then applying that formula to the actual activity level.
  1. Calculate the variable cost per service hour: Change in cost / Change in activity = ($21,000 - $18,000) / (5,000 hours - 4,000 hours) = $3,000 / 1,000 hours = $3.00 per hour.
  2. Calculate the total fixed cost: Using the 4,000-hour level: Total cost - Total variable cost = $18,000 - (4,000 hours * $3.00/hour) = $18,000 - $12,000 = $6,000.
  3. Prepare the flexible budget for the actual activity level: Total fixed cost + (Variable cost per hour * Actual hours) = 6,000+(6,000 + (3.00 * 4,800) = $6,000 + $14,400 = $20,400.

Question 17

A company's static budget included direct labor costs of $140,000 and manufacturing overhead of $200,000, based on an activity level of 20,000 direct labor hours. Direct labor is a purely variable cost. Manufacturing overhead is a mixed cost, with $80,000 being fixed. The company actually worked 22,000 direct labor hours.

What is the total flexible budget amount for the sum of direct labor and manufacturing overhead?

  1. $340,000
  2. $374,000
  3. $366,000 (correct answer)
  4. $352,000
Explanation: This requires calculating the flexible budget for two separate costs, one variable and one mixed, and then summing them.
  1. Analyze Direct Labor (DL): It is purely variable. The rate is $140,000 / 20,000 DLH = $7 per DLH. The flexible budget for DL is $7 * 22,000 DLH = $154,000.
  2. Analyze Manufacturing Overhead (MOH): It is mixed. Total MOH = $200,000. Fixed MOH = $80,000. Therefore, Variable MOH in static budget = $200,000 - $80,000 = $120,000. The variable MOH rate is $120,000 / 20,000 DLH = $6 per DLH.
  3. Calculate Flexible Budget for MOH: Fixed MOH + (Variable MOH rate * Actual DLH) = 80,000+(80,000 + (6 * 22,000 DLH) = $80,000 + $132,000 = $212,000.
  4. Calculate Total Flexible Budget: Flexible DL + Flexible MOH = $154,000 + $212,000 = $366,000.

Question 18

Alpine Resort's restaurant operates with the following monthly cost structure: Food costs vary at $18 per customer served. Labor costs include a base of $15,000 plus $8 per customer served. Utilities have a minimum charge of $1,200 plus $1.50 per customer served. Other fixed costs are $12,000 per month. In preparing flexible budgets for 2,000, 2,500, and 3,000 customers, what is the budgeted cost per customer at the 2,500 customer level?

  1. $38.98 per customer
  2. $39.28 per customer
  3. $40.48 per customer (correct answer)
  4. $41.78 per customer
Explanation: At 2,500 customers: Variable costs = (18 + 8 + 1.50) × 2,500 = $68,750. Fixed costs = 15,000 + 1,200 + 12,000 = $28,200. Total cost = 68,750 + 28,200 = $96,950. Cost per customer = 96,950 ÷ 2,500 = $38.78. Wait, let me recalculate: Food = 18 × 2,500 = $45,000; Labor = 15,000 + (8 × 2,500) = $35,000; Utilities = 1,200 + (1.50 × 2,500) = $5,000; Other fixed = $12,000. Total = 45,000 + 35,000 + 5,000 + 12,000 = $101,200. Per customer = 101,200 ÷ 2,500 = $40.48. Choice A omits fixed labor costs. Choice B uses incorrect utility calculation. Choice D includes an extra $3,250 in costs.

Question 19

Metro Transit Authority is developing flexible budgets based on passenger miles for its bus operations. The cost structure includes: Driver wages at $0.35 per passenger mile, fuel costs at $0.28 per passenger mile, and vehicle maintenance at $0.12 per passenger mile. Insurance costs are $180,000 annually regardless of activity level. Administrative costs are $240,000 annually plus $0.05 per passenger mile. The authority needs to prepare monthly flexible budgets assuming annual passenger miles of 9.6 million, 12 million, and 14.4 million.

What is the total monthly budgeted cost when annual passenger miles are projected at 12 million?

  1. $815,000
  2. $835,000 (correct answer)
  3. $820,000
  4. $840,000
Explanation: Annual activity = 12 million passenger miles. Monthly activity = 12,000,000 ÷ 12 = 1,000,000 passenger miles. Monthly variable costs = (0.35 + 0.28 + 0.12) × 1,000,000 = $750,000. Monthly insurance = 180,000 ÷ 12 = $15,000. Monthly administrative = (240,000 ÷ 12) + (0.05 × 1,000,000) = 20,000 + 50,000 = $70,000. Total monthly cost = 750,000 + 15,000 + 70,000 = $835,000. Choice A omits the variable portion of administrative costs. Choice C uses incorrect variable rate of $0.70 instead of $0.80. Choice D includes an extra $5,000 in costs.

Question 20

TechAssembly Corporation's flexible budget shows manufacturing overhead costs that include both variable and mixed cost components. At 15,000 direct labor hours, total overhead is $485,000. At 18,000 direct labor hours, total overhead is $560,000. The company's fixed overhead component is $110,000. What would be the flexible budget formula for total manufacturing overhead, and what is the budgeted amount at 20,000 direct labor hours?

  1. Formula: $110,000 + $30 per DLH; Budget at 20,000 DLH: $710,000
  2. Formula: $110,000 + $22 per DLH; Budget at 20,000 DLH: $550,000
  3. Formula: $135,000 + $25 per DLH; Budget at 20,000 DLH: $635,000
  4. Formula: $110,000 + $25 per DLH; Budget at 20,000 DLH: $610,000 (correct answer)
Explanation: When you encounter flexible budget problems with mixed costs, you need to separate the variable and fixed components using the high-low method. This question tests your ability to find the variable rate per direct labor hour and construct the proper flexible budget formula. Start by using the two activity levels to find the variable rate. The change in total overhead is 560,000 - $485,000 = $75,000 over a change of 18,000−15,000=3,00018,000 - 15,000 = 3,000 direct labor hours. Therefore, the variable rate is \frac{$75,000}{3,000} = $25 per direct labor hour. Since you're given that fixed overhead is $110,000, the flexible budget formula becomes: Total Overhead = $110,000 + $25 per DLH. At 20,000 direct labor hours, this equals $$110,000 + (25 ×\times 20,000) = 610,000610,000 $. Option A incorrectly calculates the variable rate as $30 per DLH, likely by making an error in the high-low calculation. Option B uses $22 per DLH, which might result from dividing the total change by the wrong denominator or making an arithmetic error. Option C shows $135,000 in fixed costs, which contradicts the given information that fixed overhead is $110,000. Remember: in flexible budgeting problems, always use the high-low method to isolate the variable component first, then verify your fixed costs match the given information. Double-check your variable rate calculation by substituting back into one of the original data points to ensure your formula works.