Question 1

Which of the following is not an indirect fixed cost?

Accepted Answer

A) Company president's salary 
B) Depreciation on the company building housing several profit centers 
C) Company personnel department costs 
D) Profit center supervisory salaries 
A) Company president's salary 
B) Depreciation on the company building housing several profit centers 
C) Company personnel department costs 
D) Profit center supervisory salaries

Question 2

A static budget

Accepted Answer

A) should not be prepared in a company. 
B) is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs. 
C) shows planned results at the original budgeted activity level. 
D) is changed only if the actual level of activity is different than originally budgeted. 
A) should not be prepared in a company. 
B) is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs. 
C) shows planned results at the original budgeted activity level. 
D) is changed only if the actual level of activity is different than originally budgeted.

Question 3

Las Sendas, Inc. had average operating assets of $4,000,000 and sales of $2,000,000 in 2016. If the controllable margin was $600,000, the ROI was

Accepted Answer

A) 60% 
B) 50% 
C) 30% 
D) 15% 
A) 60% 
B) 50% 
C) 30% 
D) 15%

Question 4

Not-for-profit entities

Accepted Answer

A) do not use responsibility accounting. 
B) utilize responsibility accounting in trying to maximize net income. 
C) utilize responsibility accounting in trying to minimize the cost of providing services. 
D) have only noncontrollable costs. 
A) do not use responsibility accounting. 
B) utilize responsibility accounting in trying to maximize net income. 
C) utilize responsibility accounting in trying to minimize the cost of providing services. 
D) have only noncontrollable costs.

Question 5

Trails and Paths, Inc. had average operating assets of $6,000,000 and sales of $3,000,000 in 2016. If the controllable margin was $600,000, the ROI was

Accepted Answer

A) 50% 
B) 40% 
C) 20% 
D) 10% 
A) 50% 
B) 40% 
C) 20% 
D) 10%

Question 6

Controllable costs for responsibility accounting purposes are those costs that are directly influenced by

Accepted Answer

A) a given manager within a given period of time. 
B) a change in activity. 
C) production volume. 
D) sales volume. 
A) a given manager within a given period of time. 
B) a change in activity. 
C) production volume. 
D) sales volume.

Question 7

Under management by exception, which differences between planned and actual results should be investigated?

Accepted Answer

A) Material and noncontrollable 
B) Controllable and noncontrollable 
C) Material and controllable 
D) All differences should be investigated 
A) Material and noncontrollable 
B) Controllable and noncontrollable 
C) Material and controllable 
D) All differences should be investigated

Question 8

In computing ROI, land held for future use

Accepted Answer

A) will hurt the performance measurement of an investment center's manager. 
B) is important in evaluating the performance of a profit center manager. 
C) is included in the calculation of operating assets. 
D) is considered a nonoperating asset. 
A) will hurt the performance measurement of an investment center's manager. 
B) is important in evaluating the performance of a profit center manager. 
C) is included in the calculation of operating assets. 
D) is considered a nonoperating asset.

Question 9

The terms "direct fixed costs" and "indirect fixed costs" are synonymous with "traceable costs" and "common costs," respectively.

Accepted Answer

A) True 
 B)False

Question 10

Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets?

Accepted Answer

A) Direct materials cost 
B) Direct labor cost 
C) Variable manufacturing overhead 
D) Fixed manufacturing overhead 
A) Direct materials cost 
B) Direct labor cost 
C) Variable manufacturing overhead 
D) Fixed manufacturing overhead

Question 11

The comparison of differences between actual and planned results

Accepted Answer

A) is done by the external auditors. 
B) appears on the company's external financial statements. 
C) is usually done orally in departmental meetings. 
D) appears on periodic budget reports. 
A) is done by the external auditors. 
B) appears on the company's external financial statements. 
C) is usually done orally in departmental meetings. 
D) appears on periodic budget reports.

Question 12

Within the relevant range of activity, the behavior of total costs is assumed to be

Accepted Answer

A) linear and upward sloping. 
B) linear and downward sloping. 
C) curvilinear and upward sloping. 
D) linear to a point and then level off. 
A) linear and upward sloping. 
B) linear and downward sloping. 
C) curvilinear and upward sloping. 
D) linear to a point and then level off.

Question 13

If an investment center has a $90,000 controllable margin and $1,200,000 of sales, what average operating assets are needed to have a return on investment of 10%?

Accepted Answer

A) $120,000 
B) $210,000 
C) $900,000 
D) $1,200,000 
A) $120,000 
B) $210,000 
C) $900,000 
D) $1,200,000

Question 14

A static budget is appropriate for

Accepted Answer

A) variable overhead costs. 
B) direct materials costs. 
C) fixed overhead costs. 
D) None of these answers are correct. 
A) variable overhead costs. 
B) direct materials costs. 
C) fixed overhead costs. 
D) None of these answers are correct.

Question 15

The terms controllable costs and noncontrollable costs are synonymous with variable costs and fixed costs, respectively.

Accepted Answer

A) True 
 B)False

Question 16

The current controllable margin for Henry Division is $93,000. Its current operating assets are $300,000. The division is considering purchasing equipment for $90,000 that will increase annual controllable margin by an estimated $15,000. If the equipment is purchased, what will happen to the return on investment for Henry Division?

Accepted Answer

A) An increase of 16.1% 
B) A decrease of 13.3% 
C) A decrease of 3.3% 
D) A decrease of 7.2% 
A) An increase of 16.1% 
B) A decrease of 13.3% 
C) A decrease of 3.3% 
D) A decrease of 7.2%

Question 17

Most direct fixed costs are not controllable by the profit center manager.

Accepted Answer

A) True 
 B)False

Question 18

A static budget report

Accepted Answer

A) shows costs at only 2 or 3 different levels of activity. 
B) is appropriate in evaluating a manager's effectiveness in controlling variable costs. 
C) should be used when the actual level of activity is materially different from the master budget activity level. 
D) may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed. 
A) shows costs at only 2 or 3 different levels of activity. 
B) is appropriate in evaluating a manager's effectiveness in controlling variable costs. 
C) should be used when the actual level of activity is materially different from the master budget activity level. 
D) may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.

Question 19

Sales results that are evaluated by a static budget might show
1.	favorable differences that are not justified.
2.	unfavorable differences that are not justified.

Accepted Answer

A) 1 
B) 2 
C) both 1 and 2. 
D) neither 1 nor 2. 
A) 1 
B) 2 
C) both 1 and 2. 
D) neither 1 nor 2.

Question 20

When budgeted and actual results are not the same amount, there is a budget

Accepted Answer

A) error. 
B) difference. 
C) anomaly. 
D) by-product. 
A) error. 
B) difference. 
C) anomaly. 
D) by-product.

Exam 21: Budgetary Control and Responsibility Accounting

Which of the following is not an indirect fixed cost?

A static budget

Las Sendas, Inc. had average operating assets of $4,000,000 and sales of $2,000,000 in 2016. If the controllable margin was $600,000, the ROI was

Not-for-profit entities

Trails and Paths, Inc. had average operating assets of $6,000,000 and sales of $3,000,000 in 2016. If the controllable margin was $600,000, the ROI was

Controllable costs for responsibility accounting purposes are those costs that are directly influenced by

Under management by exception, which differences between planned and actual results should be investigated?

In computing ROI, land held for future use

The terms "direct fixed costs" and "indirect fixed costs" are synonymous with "traceable costs" and "common costs," respectively.

Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets?

The comparison of differences between actual and planned results

Within the relevant range of activity, the behavior of total costs is assumed to be

If an investment center has a $90,000 controllable margin and $1,200,000 of sales, what average operating assets are needed to have a return on investment of 10%?

A static budget is appropriate for

The terms controllable costs and noncontrollable costs are synonymous with variable costs and fixed costs, respectively.

Most direct fixed costs are not controllable by the profit center manager.

A static budget report

Sales results that are evaluated by a static budget might show 1. favorable differences that are not justified. 2. unfavorable differences that are not justified.

When budgeted and actual results are not the same amount, there is a budget

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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