Question 1

Flexible budgeting relies on the assumption that unit variable costs will remain constant within the relevant range of activity.

Accepted Answer

A) True 
 B)False  True

Question 2

The area manager of the Red, White, and Brew Restaurants is considering two possible expansion alternatives. The required investments, expected controllable margins, and the ROIs of each are as follows: $\begin{array}{lllr}\text { Project } &\text {Investment } &\text {Controllable Marain }  &\mathrm{RO}\
\text { Phoenix } & \$ 120,000 & \$ 30,000 & 25 \% \
\text { Chicago } & \$ 540,000 & \$ 50,000 & 9.25 \%
\end{array}$ The Red, White, and Brew segment has currently $2,000,000 in invested capital and a controllable margin of $250,000. Which one of following projects will increase the Red, White, and Brew division's ROI?

Accepted Answer

A) Both the Phoenix and Chicago options 
B) Only the Phoenix option 
C) Only the Chicago option 
D) Neither the Phoenix nor the Chicago options 
A) Both the Phoenix and Chicago options 
B) Only the Phoenix option 
C) Only the Chicago option 
D) Neither the Phoenix nor the Chicago options B

Question 3

Controllable margin is defined as

Accepted Answer

A) sales minus variable costs. 
B) sales minus contribution margin. 
C) contribution margin less controllable fixed costs. 
D) contribution margin less noncontrollable fixed costs. 
A) sales minus variable costs. 
B) sales minus contribution margin. 
C) contribution margin less controllable fixed costs. 
D) contribution margin less noncontrollable fixed costs. C

Question 4

A flexible budget can be prepared for each of the types of budgets included in the master budget.

Accepted Answer

A) True 
 B)False

Question 5

The dollar amount of the controllable margin

Accepted Answer

A) is usually higher than the contribution margin. 
B) is usually lower than the contribution margin. 
C) is always equal to the contribution margin. 
D) cannot be a negative figure. 
A) is usually higher than the contribution margin. 
B) is usually lower than the contribution margin. 
C) is always equal to the contribution margin. 
D) cannot be a negative figure.

Question 6

A company's planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: $\begin{array}{lrlr}\text { Variable }&&\text { Fixed }\\hline
\text { Indirect materials } & \$ 140,000 & \text { Depreciation } & \$ 60,000 \
\text { Indirect labor } & 200,000 & \text { Taxes } & 10,000 \
\text { Factory supplies } & 20,000 & \text { Supervision } & 50,000
\end{array}$ A flexible budget prepared at the 80,000 machine hours level of activity would show total manufacturing overhead costs of

Accepted Answer

A) $288,000. 
B) $360,000. 
C) $384,000. 
D) $408,000. 
A) $288,000. 
B) $360,000. 
C) $384,000. 
D) $408,000.

Question 7

Which of the following would not be considered an aspect of budgetary control?

Accepted Answer

A) It assists in the determination of differences between actual and planned results. 
B) It provides feedback value needed by management to see whether actual operations are on course. 
C) It assists management in controlling operations. 
D) It provides a guarantee for favorable results. 
A) It assists in the determination of differences between actual and planned results. 
B) It provides feedback value needed by management to see whether actual operations are on course. 
C) It assists management in controlling operations. 
D) It provides a guarantee for favorable results.

Question 8

Bogey Co. recorded operating data for its Cheap division for the year. Bogey requires its return to be 10%. $$\begin{array} { l r } 
\text { Sales } & \$ 1,400,000 \
\text { Controllable margin } & 160,000 \
\text { Total average assets } & 4,000,000 \
\text { Fixed costs } & 100,000
\end{array}$$ What is the ROI for the year?

Accepted Answer

A) 4% 
B) 35% 
C) 6% 
D) 1.5% 
A) 4% 
B) 35% 
C) 6% 
D) 1.5%

Question 9

Performance reports for cost centers compare actual

Accepted Answer

A) total costs with static budget data. 
B) total costs with flexible budget data. 
C) controllable costs with static budget data. 
D) controllable costs with flexible budget data. 
A) total costs with static budget data. 
B) total costs with flexible budget data. 
C) controllable costs with static budget data. 
D) controllable costs with flexible budget data.

Question 10

In developing a flexible budget within a relevant range of activity,

Accepted Answer

A) only fixed costs are included. 
B) it is necessary to relate variable cost data to the activity index chosen. 
C) it is necessary to prepare a budget at 1,000 unit increments. 
D) variable and fixed costs are combined and are reported as a total cost. 
A) only fixed costs are included. 
B) it is necessary to relate variable cost data to the activity index chosen. 
C) it is necessary to prepare a budget at 1,000 unit increments. 
D) variable and fixed costs are combined and are reported as a total cost.

Question 11

Of the following choices, which contain both a traceable fixed cost and a common fixed cost?

Accepted Answer

A) Profit center manager's salary and timekeeping costs for a responsibility center's employees. 
B) Company president's salary and company personnel department costs. 
C) Company personnel department costs and timekeeping costs for a responsibility center's employees. 
D) Depreciation on a responsibility center's equipment and supervisory salaries for the center. 
A) Profit center manager's salary and timekeeping costs for a responsibility center's employees. 
B) Company president's salary and company personnel department costs. 
C) Company personnel department costs and timekeeping costs for a responsibility center's employees. 
D) Depreciation on a responsibility center's equipment and supervisory salaries for the center.

Question 12

Which responsibility centers generate both revenues and costs?

Accepted Answer

A) Investment and profit centers 
B) Profit and cost centers 
C) Cost and investment centers 
D) Only profit centers 
A) Investment and profit centers 
B) Profit and cost centers 
C) Cost and investment centers 
D) Only profit centers

Question 13

Which of the following will not result in an unfavorable controllable margin difference?

Accepted Answer

A) Sales exceeding budget; costs under budget 
B) Sales exceeding budget; costs over budget 
C) Sales under budget; costs under budget 
D) Sales under budget; costs over budget 
A) Sales exceeding budget; costs under budget 
B) Sales exceeding budget; costs over budget 
C) Sales under budget; costs under budget 
D) Sales under budget; costs over budget

Question 14

A major element in budgetary control is

Accepted Answer

A) the preparation of long-term plans. 
B) the comparison of actual results with planned objectives. 
C) the valuation of inventories. 
D) approval of the budget by the stockholders. 
A) the preparation of long-term plans. 
B) the comparison of actual results with planned objectives. 
C) the valuation of inventories. 
D) approval of the budget by the stockholders.

Question 15

A flexible budget depicted graphically

Accepted Answer

A) is identical to a CVP graph. 
B) differs from a CVP graph in the way that fixed costs are shown. 
C) differs from a CVP graph in the way that variable costs are shown. 
D) differs from a CVP graph in that sales revenue is not shown. 
A) is identical to a CVP graph. 
B) differs from a CVP graph in the way that fixed costs are shown. 
C) differs from a CVP graph in the way that variable costs are shown. 
D) differs from a CVP graph in that sales revenue is not shown.

Question 16

What budgeted amounts appear on the flexible budget?

Accepted Answer

A) Original budgeted amounts at the static budget activity level 
B) Actual costs for the budgeted activity level 
C) Budgeted amounts for the actual activity level achieved 
D) Actual costs for the estimated activity level 
A) Original budgeted amounts at the static budget activity level 
B) Actual costs for the budgeted activity level 
C) Budgeted amounts for the actual activity level achieved 
D) Actual costs for the estimated activity level

Question 17

Smart Manufacturing budgeted costs for 50,000 linear feet of block are: $\begin{array}{lr}
\text {Fixed manufacturing costs }&\text {$ \$ 24,000 $ per month }\
\text {Variable manufacturing costs }&\text {$ \$ 16.00 $ per line ar foot }\
\end{array}$
 Smart installed 40,000 linear feet of block during March. How much is budgeted total manufacturing costs in March?

Accepted Answer

A) $640,000 
B) $824,000 
C) $800,000 
D) $664,000 
A) $640,000 
B) $824,000 
C) $800,000 
D) $664,000

Question 18

Costs incurred indirectly and allocated to a responsibility level are considered to be

Accepted Answer

A) nonmaterial. 
B) mixed. 
C) controllable. 
D) noncontrollable. 
A) nonmaterial. 
B) mixed. 
C) controllable. 
D) noncontrollable.

Question 19

A flexible budget can be prepared for which of the following budgets comprising the master budget?

Accepted Answer

A) Sales 
B) Overhead 
C) Direct materials 
D) All of these answers are correct. 
A) Sales 
B) Overhead 
C) Direct materials 
D) All of these answers are correct.

Question 20

The best measure of the performance of the manager of a profit center is the

Accepted Answer

A) rate of return on investment. 
B) success in meeting budgeted goals for controllable costs. 
C) amount of controllable margin generated by the profit center. 
D) amount of contribution margin generated by the profit center. 
A) rate of return on investment. 
B) success in meeting budgeted goals for controllable costs. 
C) amount of controllable margin generated by the profit center. 
D) amount of contribution margin generated by the profit center.

Exam 21: Budgetary Control and Responsibility Accounting

Flexible budgeting relies on the assumption that unit variable costs will remain constant within the relevant range of activity.

Controllable margin is defined as

A flexible budget can be prepared for each of the types of budgets included in the master budget.

The dollar amount of the controllable margin

Which of the following would not be considered an aspect of budgetary control?

Bogey Co. recorded operating data for its Cheap division for the year. Bogey requires its return to be 10%. Sales \ 1,400,000 Controllable margin 160,000 Total average assets 4,000,000 Fixed costs 100,000 What is the ROI for the year?

Performance reports for cost centers compare actual

In developing a flexible budget within a relevant range of activity,

Of the following choices, which contain both a traceable fixed cost and a common fixed cost?

Which responsibility centers generate both revenues and costs?

Which of the following will not result in an unfavorable controllable margin difference?

A major element in budgetary control is

A flexible budget depicted graphically

What budgeted amounts appear on the flexible budget?

Smart Manufacturing budgeted costs for 50,000 linear feet of block are: Fixed manufacturing costs \ 24,000 per month Variable manufacturing costs \ 16.00 per line ar foot Smart installed 40,000 linear feet of block during March. How much is budgeted total manufacturing costs in March?

Costs incurred indirectly and allocated to a responsibility level are considered to be

A flexible budget can be prepared for which of the following budgets comprising the master budget?

The best measure of the performance of the manager of a profit center is the

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Merchandising Operations and the Multiple-Step Income Statement

Reporting and Analyzing Inventory

Fraud, Internal Control, and Cash

Reporting and Analyzing Receivables

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities

Reporting and Analyzing Stockholders Equity

Statement of Cash Flows

Financial Analysis: The Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Activity-Based Costing

Cost-Volume-Profit

Cost-Volume-Profit Analysis: Additional Issues

Incremental Analysis

Budgetary Planning

Standard Costs and Balanced Scorecard

Planning for Capital Investments

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