ExpertMedium2 marksMultiple Choice
ACCA · Question 22 · Budgeting
Section A
A municipal waste management facility originally budgeted to process 10,000 tons of waste at a variable cost of $15 per ton and fixed costs of $50,000.
During the month, they actually processed 12,000 tons. To properly evaluate cost control performance, management should compare actual costs against which of the following?
Section A
A municipal waste management facility originally budgeted to process 10,000 tons of waste at a variable cost of $15 per ton and fixed costs of $50,000.
During the month, they actually processed 12,000 tons. To properly evaluate cost control performance, management should compare actual costs against which of the following?
Answer options:
A.
The original fixed budget based on 10,000 tons.
B.
A flexible budget based on 12,000 tons.
C.
A zero-based budget for 10,000 tons.
D.
A rolling budget based on next month's forecast.
How to approach this question
For performance evaluation (control), you must compare actual costs against what the costs *should have been* for the actual level of activity achieved.
Full Answer
B.A flexible budget based on 12,000 tons.✓ Correct
A flexible budget is a budget designed to change in accordance with the actual level of activity achieved. For meaningful variance analysis and performance evaluation, actual results must be compared against a flexed budget (what the costs should have been for 12,000 tons), rather than the original fixed budget (10,000 tons).
Common mistakes
Choosing the original fixed budget, which is only used for initial planning, not ex-post control.
Practice the full ACCA MA — Management Accounting Practice Exam 6
38 questions · hints · full answers · grading
More questions from this exam
Q01**Section A**
Global Wildlife Trust, an international NGO, is deciding whether to expand its con...EasyQ02**Section A**
CloudSync, a rapidly growing SaaS tech startup, monitors the daily server uptime a...EasyQ03**Section A**
AgriGrow operates a network of automated hydroponic farms. The management accounta...MediumQ04**Section A**
A municipal water treatment plant utilizes both financial accounting and managemen...EasyQ05**Section A**
In a boutique consulting firm, management relies heavily on quantitative variance ...Medium