Budgeting and Variance Analysis for Competitive Exams

Budgeting and Variance Analysis - Competitive Exam Level

Q. A company budgeted $200,000 for direct materials but actually spent $220,000. What is the direct materials variance?

Solution

Direct materials variance = Actual Cost - Budgeted Cost = $220,000 - $200,000 = $20,000 Unfavorable.

Correct Answer: B — $20,000 Unfavorable

Q. If a company has a budgeted profit of $50,000 and an actual profit of $30,000, what is the profit variance?

Solution

Profit variance = Actual Profit - Budgeted Profit = $30,000 - $50,000 = -$20,000, which is Unfavorable.

Correct Answer: B — $20,000 Unfavorable

Q. If the budgeted fixed overhead is $200,000 and the actual fixed overhead is $210,000, what is the fixed overhead variance?

Solution

Fixed overhead variance = Actual Fixed Overhead - Budgeted Fixed Overhead = $210,000 - $200,000 = $10,000 Unfavorable.

Correct Answer: B — $10,000 Unfavorable

Q. What is the break-even point in sales dollars if the fixed costs are $100,000 and the contribution margin ratio is 40%?

Solution

Break-even point in sales dollars = Fixed Costs / Contribution Margin Ratio = $100,000 / 0.40 = $250,000.

Correct Answer: A — $250,000

Q. What is the formula for calculating the budgeted profit margin?

Solution

The budgeted profit margin is calculated as Budgeted Sales - Budgeted Costs.

Correct Answer: A — Budgeted Sales - Budgeted Costs

Q. Which of the following is NOT a component of a flexible budget?

Solution

A flexible budget adjusts for changes in sales volume and includes variable and fixed costs, but does not directly include historical data.

Correct Answer: D — Historical data

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