Question 1

A flexible budget report will show both actual and budget cost based on the actual activity level achieved.

Accepted Answer

A) True 
 B)False

Question 2

A cost center

Accepted Answer

A) only incurs costs and does not directly generate revenues. 
B) incurs costs and generates revenues. 
C) is a responsibility center of a company which incurs losses. 
D) is a responsibility center which generates profits and evaluates the investment cost of earning the profit. 
A) only incurs costs and does not directly generate revenues. 
B) incurs costs and generates revenues. 
C) is a responsibility center of a company which incurs losses. 
D) is a responsibility center which generates profits and evaluates the investment cost of earning the profit.

Question 3

To develop the flexible budget, management takes all of the following steps except identify the

Accepted Answer

A) activity index and the relevant range of activity. 
B) variable costs and determine the budgeted variable cost per unit. 
C) fixed costs and determine the budgeted fixed cost per unit. 
D) All of these options are steps in developing the flexible budget. 
A) activity index and the relevant range of activity. 
B) variable costs and determine the budgeted variable cost per unit. 
C) fixed costs and determine the budgeted fixed cost per unit. 
D) All of these options are steps in developing the flexible budget.

Question 4

Rhein Manufacturing recorded operating data for its auto accessories division for the year. $\begin{array}{lr}
\text { Sales } & \$ 750,000 \
\text { Contribution margin } & 150,000 \
\text { Total direct fixed costs } & 90,000 \
\text { Average total operating assets } & 400,000
\end{array}$ How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30,000, assuming fixed costs are held constant?

Accepted Answer

A) 45.0% 
B) 22.5% 
C) 15.0% 
D) 12.0% 
A) 45.0% 
B) 22.5% 
C) 15.0% 
D) 12.0%

Question 5

A department has budgeted monthly manufacturing overhead cost of $540,000 plus $3 per direct labor hour. If a flexible budget report reflects $1,044,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved during the month was

Accepted Answer

A) 528,000 direct labor hours. 
B) 168,000 direct labor hours. 
C) 348,000 direct labor hours. 
D) Cannot be determined from the information provided. 
A) 528,000 direct labor hours. 
B) 168,000 direct labor hours. 
C) 348,000 direct labor hours. 
D) Cannot be determined from the information provided.

Question 6

If costs are not responsive to changes in activity level, then these costs can be best described as

Accepted Answer

A) mixed. 
B) flexible. 
C) variable. 
D) fixed. 
A) mixed. 
B) flexible. 
C) variable. 
D) fixed.

Question 7

If an investment center has generated a controllable margin of $150,000 and sales of $600,000, what is the return on investment for the investment center if average operating assets were $1,000,000 during the period?

Accepted Answer

A) 15% 
B) 25% 
C) 45% 
D) 60% 
A) 15% 
B) 25% 
C) 45% 
D) 60%

Question 8

Cost centers, profit centers, and investment centers can all be classified as responsibility centers.

Accepted Answer

A) True 
 B)False

Question 9

A static budget report is appropriate for

Accepted Answer

A) only fixed manufacturing costs. 
B) only fixed selling and administrative expenses. 
C) variable selling and administrative expenses. 
D) both fixed manufacturing costs and fixed selling and administrative expenses. 
A) only fixed manufacturing costs. 
B) only fixed selling and administrative expenses. 
C) variable selling and administrative expenses. 
D) both fixed manufacturing costs and fixed selling and administrative expenses.

Question 10

Top management can control

Accepted Answer

A) only controllable costs. 
B) only noncontrollable costs. 
C) all costs. 
D) some noncontrollable costs and all controllable costs. 
A) only controllable costs. 
B) only noncontrollable costs. 
C) all costs. 
D) some noncontrollable costs and all controllable costs.

Question 11

If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on

Accepted Answer

A) the original planned level of activity. 
B) 54,000 units of activity. 
C) 60,000 units of activity. 
D) 48,000 units of activity. 
A) the original planned level of activity. 
B) 54,000 units of activity. 
C) 60,000 units of activity. 
D) 48,000 units of activity.

Question 12

A responsibility report should

Accepted Answer

A) be prepared in accordance with generally accepted accounting principles. 
B) show only those costs that a manager can control. 
C) only show variable costs. 
D) only be prepared at the highest level of managerial responsibility. 
A) be prepared in accordance with generally accepted accounting principles. 
B) show only those costs that a manager can control. 
C) only show variable costs. 
D) only be prepared at the highest level of managerial responsibility.

Question 13

Management by exception

Accepted Answer

A) causes managers to be buried under voluminous paperwork. 
B) means that all differences will be investigated. 
C) means that only unfavorable differences will be investigated. 
D) means that material differences will be investigated. 
A) causes managers to be buried under voluminous paperwork. 
B) means that all differences will be investigated. 
C) means that only unfavorable differences will be investigated. 
D) means that material differences will be investigated.

Question 14

All of the following statements are correct about controllable costs except

Accepted Answer

A) all costs are controllable at some level of responsibility within a company. 
B) all costs are controllable by top management. 
C) fewer costs are controllable as one moves up to each higher level of managerial responsibility. 
D) costs incurred directly by a level of responsibility are controllable at that level. 
A) all costs are controllable at some level of responsibility within a company. 
B) all costs are controllable by top management. 
C) fewer costs are controllable as one moves up to each higher level of managerial responsibility. 
D) costs incurred directly by a level of responsibility are controllable at that level.

Question 15

Griffin Corp. is evaluating its Piquette division, an investment center. The division has a $60,000 controllable margin and $400,000 of sales. How much will Griffin's average operating assets be when its return on investment is 10%?

Accepted Answer

A) $600,000 
B) $660,000 
C) $400,000 
D) $340,000 
A) $600,000 
B) $660,000 
C) $400,000 
D) $340,000

Question 16

At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials:

Accepted Answer

A) $1,400 unfavorable. 
B) $1,400 favorable. 
C) $600 favorable. 
D) $600 unfavorable. 
A) $1,400 unfavorable. 
B) $1,400 favorable. 
C) $600 favorable. 
D) $600 unfavorable.

Question 17

The purpose of the sales budget report is to

Accepted Answer

A) control selling expenses. 
B) determine whether income objectives are being met. 
C) determine whether sales goals are being met. 
D) control sales commissions. 
A) control selling expenses. 
B) determine whether income objectives are being met. 
C) determine whether sales goals are being met. 
D) control sales commissions.

Question 18

A responsibility report for a profit center will

Accepted Answer

A) not show controllable fixed costs. 
B) not show indirect fixed costs. 
C) show noncontrollable fixed costs. 
D) not show cumulative year-to-date results. 
A) not show controllable fixed costs. 
B) not show indirect fixed costs. 
C) show noncontrollable fixed costs. 
D) not show cumulative year-to-date results.

Question 19

Given below is an excerpt from a management performance report: $\begin{array}{llll}&\text { Budget}&\text { Actual}&\text { Difference }\
\text { Contribution margin } & \$ 1,000,000 & \$ 1,050,000 & \$ 50,000 \
\text { Controllable fixed costs } & \$ 500,000 & \$ 450,000 & \$ 50,000
\end{array}$ The manager's overall performance

Accepted Answer

A) is 20% below expectations. 
B) is 20% above expectations. 
C) is equal to expectations. 
D) cannot be determined from information given. 
A) is 20% below expectations. 
B) is 20% above expectations. 
C) is equal to expectations. 
D) cannot be determined from information given.

Question 20

The formula for computing return on investment is controllable margin divided by average operating assets.

Accepted Answer

A) True 
 B)False

Exam 21: Budgetary Control and Responsibility Accounting

A flexible budget report will show both actual and budget cost based on the actual activity level achieved.

A cost center

To develop the flexible budget, management takes all of the following steps except identify the

A department has budgeted monthly manufacturing overhead cost of $540,000 plus $3 per direct labor hour. If a flexible budget report reflects $1,044,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved during the month was

If costs are not responsive to changes in activity level, then these costs can be best described as

If an investment center has generated a controllable margin of $150,000 and sales of $600,000, what is the return on investment for the investment center if average operating assets were $1,000,000 during the period?

Cost centers, profit centers, and investment centers can all be classified as responsibility centers.

A static budget report is appropriate for

Top management can control

If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on

A responsibility report should

Management by exception

All of the following statements are correct about controllable costs except

Griffin Corp. is evaluating its Piquette division, an investment center. The division has a $60,000 controllable margin and $400,000 of sales. How much will Griffin's average operating assets be when its return on investment is 10%?

At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials:

The purpose of the sales budget report is to

A responsibility report for a profit center will

Given below is an excerpt from a management performance report: Budget Actual Difference Contribution margin \ 1,000,000 \ 1,050,000 \ 50,000 Controllable fixed costs \ 500,000 \ 450,000 \ 50,000 The manager's overall performance

The formula for computing return on investment is controllable margin divided by average operating assets.

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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