1. static budget: A.is based totally on prior year's costs. B.is based on one anticipated activity level. C.is based on a range of activity. D.is preferred over a flexible budget in the evaluation of performance.

E.presents a clear measure of performance when planned activity differs from actual activity.

2. Flexible budgets reflect a company's anticipated costs based on variations in: A.activity levels. B.inflation rates. C.managers. D.anticipated capital acquisitions. E.standards.

3. flexible budget: A.parallels a static budget with respect to format and advantages of use. B.is preferred over a static budget in the evaluation of performance. C.gives management flexibility in terms of meeting budget goals. D.can be used to compare actual and budgeted costs at various levels of activity. E.is characterized by choices "B" and "D" above.

4. Interstate Merchandising anticipated selling 29,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 31,500 units and $182,700, respectively. If the company used a static budget for performance evaluations, Interstate would report a cost variance of: A.$6,300U. B.$6,300F. C.$8,700U. D.$8,700F. E.some other amount not listed above.

5. Gordon Merchandising anticipated selling 27,000 units of a major product and paying sales commissions of $6 per unit. Actual sales and sales commissions totaled 27,500 units and $171,400, respectively. If the company used a flexible budget for performance evaluations, Gordon would report a cost variance of: A.$6,400U. B.$6,400F. C.$9,400U. D.$9,400F. E.some other amount not listed above.

6. Bavaria's budget for variable overhead and fixed overhead revealed the following information for an anticipated 40,000 hours of activity: variable overhead, $348,000; fixed overhead, $600,000. The company actually worked 43,000 hours, and actual overhead incurred was: variable, $365,500; fixed, $608,000. Required: A. Compute the company's total cost variance for variable overhead and fixed overhead if the firm uses a static budget to help assess performance. B. Repeat part "A" assuming the use of a flexible budget. C. Which of the two budgets (static or flexible) is preferred for performance evaluations? Why?

7. The Houston Chamber Orchestra presents a series of concerts throughout the year. Budgeted fixed costs total $300,000 for the concert season; variable costs are expected to average $5 per patron. The orchestra uses flexible budgeting. Required: A. Prepare a flexible budget that shows the expected costs of 8,000, 8,500, and 9,000 patrons. B. Construct the orchestra's flexible budget formula. C. Assume that 8,700 patrons attended concerts during the year just ended, and actual costs were: variable, $42,000; fixed, $307,500. Evaluate the orchestra's financial performance by computing variances for variable costs and fixed costs.