A company sells cakes for special occasions. It measures its output by the number of cakes produced. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes, Cost Formula Revenue/Cost Revenue Employee salaries and wages. Cake ingredients Other expenses Total expenses Net operating income Fixed Cost per Month $1,250 $2,800 Variable Revenue/Cost per cake $90 $18 $35 Actual Results $11.776 3,910 4,500 2.750 11.160 $616 When the company prepared its planning budget at the beginning of November, it assumed that 125 cakes would be owever the actual number of cakes sold in November was 128. the most likely reason for the Cake Ingredients Activity Variance is The number of cakes sold was higher than the number of cakes expected to be sold before the month started. The company budgeted cake ingredients to be higher than the amount actually incurred The actual cost of the cake ingredients is less than budgeted. P The cost formula for cake ingredients is incorrect so the flexible budget is too low.
A company sells cakes for special occasions. It measures its output by the number of cakes produced. The company provided the following fixed and variable cost estimates that it uses for budgeting purposes, Cost Formula Revenue/Cost Revenue Employee salaries and wages. Cake ingredients Other expenses Total expenses Net operating income Fixed Cost per Month $1,250 $2,800 Variable Revenue/Cost per cake $90 $18 $35 Actual Results $11.776 3,910 4,500 2.750 11.160 $616 When the company prepared its planning budget at the beginning of November, it assumed that 125 cakes would be owever the actual number of cakes sold in November was 128. the most likely reason for the Cake Ingredients Activity Variance is The number of cakes sold was higher than the number of cakes expected to be sold before the month started. The company budgeted cake ingredients to be higher than the amount actually incurred The actual cost of the cake ingredients is less than budgeted. P The cost formula for cake ingredients is incorrect so the flexible budget is too low.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Master Budget
A master budget can be defined as an estimation of the revenue earned or expenses incurred over a specified period of time in the future and it is generally prepared on a periodic basis which can be either monthly, quarterly, half-yearly, or annually. It helps a business, an organization, or even an individual to manage the money effectively. A budget also helps in monitoring the performance of the people in the organization and helps in better decision-making.
Sales Budget and Selling
A budget is a financial plan designed by an undertaking for a definite period in future which acts as a major contributor towards enhancing the financial success of the business undertaking. The budget generally takes into account both current and future income and expenses.
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Transcribed Image Text:A company sells cakes for special occasions. It measures its output by the number of cakes produced. The company has
provided the following fixed and variable cost estimates that it uses for budgeting purposes.
Cost Formula
Revenue/Cost
Revenue
Employee salaries and wages.
Cake ingredients
Other expenses
Total expenses
Net operating income
Fixed Cost per
Month
$1,250
$2,800
budgeted.
Variable
Revenue/Cost per
cake
$90
$18
$35
Actual Results
When the company prepared its planning budget at the beginning of November, it assumed that 125 cakes would be sold.
however the actual number of cakes sold in November was 128.
The most likely reason for the Cake Ingredients Activity Variance is
O The number of cakes sold was higher than the number of cakes expected to be sold before the month started.
The company budgeted cake ingredients to be higher than the amount actually incurred
O The actual cost of the cake ingredients i ss th
O The cost formula for cake ingredients is incorrect so the flexible budget is too low.
$11.776
3.910
4,500
2.750
11,160
$616
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