Managerial Accounting

Homework Submission
(Chapter 4)
(Alangilan, Sionet, B.)

4-1 What is a static planning budget?

Ans: A static budget is a type of budget that incorporates anticipated values about inputs and
outputs that are conceived before the period in question begins. When compared to the actual results that are
received after the fact, the numbers from static budgets are often quite different from the actual results.

4-2 What is a flexible budget and how does it differ from a static planning budget?

Ans: Flexible budget is an estimate of what revenues and cost should have been, given the actual
level of activity for the period. In this model, budgets will be changed when volume change. Static planning
budget is a budget that does not change as the volume changes, it does not depend on the level of activity.
The budget is fixed in all activity levels.

4-3 What are some of the possible reasons that actual results may differ from what had been budgeted at the
beginning of the period?
Ans: I think the possible reasons are due to changes in the prices, as well as the changes in the level
of activity. It also depends on how the company’s effectively manage their resources.

4-4 Why is it difficult to interpret a difference between how much expenses was budgeted at the beginning of the
period and how much was actually spent?
Ans:

4-5 What is a revenue variance and what does it mean?

Ans: Revenue variance is the difference between how much the revenue should have been, given
the actual level of activity, and the actual revenue for the period. There are two kinds, a favorable and
unfavorable revenue variance. When we say favorable, the revenue is higher than what expected, given the
actual level of activity for the period. Wherein unfavorable is when the obtained revenue is lower that what
expected during the period given the actual level of activity.

4-6 What is a spending variance and what does it mean?

Ans: The costs of inventory or products which are completed from the mixing department are
transferred to the Firing Department. . Materials cost, labor and overhead costs are transferred to the firing
department. In the Firing Department completed products from the mixing department are now being
process to be able to produce a completed products to be transferred out from the work in process account to
the finished good account, these products are now available for selling.

4-7 What is meant by the term equivalent units of production when the weighted-average method is used?

Ans: Under weighted-average method, it blends together units and costs from the current period
with units and costs from the prior period. Equivalent Units of Production is computed under weighted-
average method by adding the Units transferred out of the department to the equivalent units in the
department’s ending inventory.
Managerial Accounting
Homework Submission
(Chapter 4)
(Alangilan, Sionet, B.)

4-8 Watkins Trophies, Inc., produces thousands of medallions made of bronze, silver and gold. The medallions are
identical except for the materials used in their manufacture. What costing system would you advise the
company to use?
Ans: Process costing, even though materials used in manufacturing is different, products are still
identical or homogenous, labor and manufacturing overhead used are the still the same to all of the products.
Still medals are identical and go through the same production processes, thus process costing is best suited
costing system for the company’s needs.