Question 1

A static budget is usually appropriate in evaluating a manager's effectiveness in controlling

Accepted Answer

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

Question 2

More costs become controllable as one moves down to each lower level of managerial responsibility.

Accepted Answer

A) True 
 B)False

Question 3

Management by exception

Accepted Answer

A) is most effective at top levels of management. 
B) can be implemented at each level of responsibility within an organization. 
C) can only be applied when comparing actual results with the master budget. 
D) is the opposite of goal congruence. 
A) is most effective at top levels of management. 
B) can be implemented at each level of responsibility within an organization. 
C) can only be applied when comparing actual results with the master budget. 
D) is the opposite of goal congruence.

Question 4

The flexible budget report evaluates a manager's performance in two areas: (1) production and (2) costs.

Accepted Answer

A) True 
 B)False

Question 5

What is the primary difference between a static budget and a flexible budget?

Accepted Answer

A) The static budget contains only fixed costs, while the flexible budget contains only variable costs. 
B) The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels. 
C) The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management. 
D) The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold. 
A) The static budget contains only fixed costs, while the flexible budget contains only variable costs. 
B) The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels. 
C) The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management. 
D) The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold.

Question 6

A static budget is appropriate in evaluating a manager's performance if

Accepted Answer

A) actual activity closely approximates the master budget activity. 
B) actual activity is less than the master budget activity. 
C) the company prepares reports on an annual basis. 
D) the company is a not-for-profit organization. 
A) actual activity closely approximates the master budget activity. 
B) actual activity is less than the master budget activity. 
C) the company prepares reports on an annual basis. 
D) the company is a not-for-profit organization.

Question 7

Which of the following is not a true statement?

Accepted Answer

A) All costs are controllable at some level within a company. 
B) Responsibility accounting applies to both profit and not-for-profit entities. 
C) Fewer costs are controllable as one moves up to each higher level of managerial responsibility. 
D) The term segment is sometimes used to identify areas of responsibility in decentralized operations. 
A) All costs are controllable at some level within a company. 
B) Responsibility accounting applies to both profit and not-for-profit entities. 
C) Fewer costs are controllable as one moves up to each higher level of managerial responsibility. 
D) The term segment is sometimes used to identify areas of responsibility in decentralized operations.

Question 8

A static budget is an effective means to evaluate a manager's ability to control costs, regardless of the actual activity level.

Accepted Answer

A) True 
 B)False

Question 9

Power Manufacturing recorded operating data for its shoe division for the year. $$\begin{array} { l r } 
\text { Sales } & \$ 1,500,000 \
\text { Contribution margin } & 300,000 \
\text { Controllable fixed costs } & 180,000 \
\text { Average total operating assets } & 600,000
\end{array}$$ How much is controllable margin for the year?

Accepted Answer

A) 20% 
B) 50% 
C) $300,000 
D) $120,000 
A) 20% 
B) 50% 
C) $300,000 
D) $120,000

Question 10

Grown Industries reported the following items for 2016: $$\begin{array} { l r } 
\text { Income tax expense } & \$ 60,000 \
\text { Contribution margin } & 200,000 \
\text { Controllable fixed costs } & 80,000 \
\text { Interest expense } & 40,000 \
\text { Total operating assets } & 650,000
\end{array}$$ How much is controllable margin?

Accepted Answer

A) $200,000 
B) $120,000 
C) $60,000 
D) $20,000 
A) $200,000 
B) $120,000 
C) $60,000 
D) $20,000

Question 11

Budget reports should be prepared

Accepted Answer

A) daily. 
B) monthly. 
C) weekly. 
D) as frequently as needed. 
A) daily. 
B) monthly. 
C) weekly. 
D) as frequently as needed.

Question 12

Budget reports provide the feedback needed by management to see whether actual operations are on course.

Accepted Answer

A) True 
 B)False

Question 13

A flexible budget

Accepted Answer

A) is prepared when management cannot agree on objectives for the company. 
B) projects budget data for various levels of activity. 
C) is only useful in controlling fixed costs. 
D) cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results. 
A) is prepared when management cannot agree on objectives for the company. 
B) projects budget data for various levels of activity. 
C) is only useful in controlling fixed costs. 
D) cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results.

Question 14

Flexible budgets are widely used in production and service departments.

Accepted Answer

A) True 
 B)False

Question 15

In the Goblette Manufacturing Company, indirect labor is budgeted for $108,000 and factory supervision is budgeted for $36,000 at normal capacity of 160,000 direct labor hours. If 180,000 direct labor hours are worked, flexible budget total for these costs is:

Accepted Answer

A) $144,000. 
B) $162,000. 
C) $157,500. 
D) $148,500. 
A) $144,000. 
B) $162,000. 
C) $157,500. 
D) $148,500.

Question 16

A flexible budget is a series of static budgets at different levels of activities.

Accepted Answer

A) True 
 B)False

Question 17

Kevin Jarvis Industries produced 192,000 units in 90,000 direct labor hours. Production for the period was estimated at 198,000 units and 99,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at

Accepted Answer

A) 96,000 hours and 99,000 hours. 
B) 99,000 hours and 90,000 hours. 
C) 96,000 hours and 90,000 hours. 
D) 90,000 hours and 90,000 hours. 
A) 96,000 hours and 99,000 hours. 
B) 99,000 hours and 90,000 hours. 
C) 96,000 hours and 90,000 hours. 
D) 90,000 hours and 90,000 hours.

Question 18

The master budget of Windy Co. shows that the planned activity level for next year is expected to be 50,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected: $$\begin{array} { l r } 
\text { Indirect labor } & \$ 720,000 \
\text { Machine supplies } & 180,000 \
\text { Indirect materials } & 210,000 \
\text { Depreciation on factory building } & 150,000 \
\text { Total manufacturing overhead } & \$1 , 260,000
\end{array}$$ A flexible budget for a level of activity of 60,000 machine hours would show total manufacturing overhead costs of

Accepted Answer

A) $1,482,000. 
B) $1,260,000. 
C) $1,512,000. 
D) $1,362,000. 
A) $1,482,000. 
B) $1,260,000. 
C) $1,512,000. 
D) $1,362,000.

Question 19

At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects the vertical axis at $30,000. At 15,000 direct labor hours, a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $90,000. Fixed and variable costs may be expressed as:

Accepted Answer

A) $30,000 fixed plus $4 per direct labor hour variable. 
B) $30,000 fixed plus $6 per direct labor hour variable. 
C) $60,000 fixed plus $2 per direct labor hour variable. 
D) $60,000 fixed plus $4 per direct labor hour variable. 
A) $30,000 fixed plus $4 per direct labor hour variable. 
B) $30,000 fixed plus $6 per direct labor hour variable. 
C) $60,000 fixed plus $2 per direct labor hour variable. 
D) $60,000 fixed plus $4 per direct labor hour variable.

Question 20

The purpose of the departmental overhead cost report is to

Accepted Answer

A) control indirect labor costs. 
B) control selling expense. 
C) determine the efficient use of materials. 
D) control overhead costs. 
A) control indirect labor costs. 
B) control selling expense. 
C) determine the efficient use of materials. 
D) control overhead costs.

Exam 21: Budgetary Control and Responsibility Accounting

A static budget is usually appropriate in evaluating a manager's effectiveness in controlling

More costs become controllable as one moves down to each lower level of managerial responsibility.

Management by exception

The flexible budget report evaluates a manager's performance in two areas: (1) production and (2) costs.

What is the primary difference between a static budget and a flexible budget?

A static budget is appropriate in evaluating a manager's performance if

Which of the following is not a true statement?

A static budget is an effective means to evaluate a manager's ability to control costs, regardless of the actual activity level.

Power Manufacturing recorded operating data for its shoe division for the year. Sales \ 1,500,000 Contribution margin 300,000 Controllable fixed costs 180,000 Average total operating assets 600,000 How much is controllable margin for the year?

Grown Industries reported the following items for 2016: Income tax expense \ 60,000 Contribution margin 200,000 Controllable fixed costs 80,000 Interest expense 40,000 Total operating assets 650,000 How much is controllable margin?

Budget reports should be prepared

Budget reports provide the feedback needed by management to see whether actual operations are on course.

A flexible budget

Flexible budgets are widely used in production and service departments.

In the Goblette Manufacturing Company, indirect labor is budgeted for $108,000 and factory supervision is budgeted for $36,000 at normal capacity of 160,000 direct labor hours. If 180,000 direct labor hours are worked, flexible budget total for these costs is:

A flexible budget is a series of static budgets at different levels of activities.

Kevin Jarvis Industries produced 192,000 units in 90,000 direct labor hours. Production for the period was estimated at 198,000 units and 99,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at

At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects the vertical axis at $30,000. At 15,000 direct labor hours, a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $90,000. Fixed and variable costs may be expressed as:

The purpose of the departmental overhead cost report is to

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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