Question 1

A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost per unit × activity level).

Accepted Answer

A) True 
 B)False

Question 2

Which statement is true?

Accepted Answer

A) An investment center is responsible for revenues and expenses, as well as earning a return on assets. 
B) An investment center is only responsible for its investments. 
C) An investment center is only responsible for revenues and expenses. 
D) A profit center is evaluated using contribution margin, while an investment center is evaluated using ROI. 
A) An investment center is responsible for revenues and expenses, as well as earning a return on assets. 
B) An investment center is only responsible for its investments. 
C) An investment center is only responsible for revenues and expenses. 
D) A profit center is evaluated using contribution margin, while an investment center is evaluated using ROI.

Question 3

Le Sud Retailers has a current return on investment of 10% and the company has established an 8% minimum rate of return for the division.The division manager has two investment projects available, for which the following estimates have been made: Project A - Annual controllable margin = $24,000, operating assets = $400,000
Project B - Annual controllable margin = $60,000, operating assets = $550,000
Which project should be funded?

Accepted Answer

A) Both projects 
B) Project A 
C) Project B 
D) Neither project 
A) Both projects 
B) Project A 
C) Project B 
D) Neither project

Question 4

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 5

Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

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 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

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: $\begin{array}{lrlr}\text { Variable }&&\text { Fixed }\
\text { Indirect materials } & \$ 120,000 & \text { Depreciation } & \$ 50,000 \
\text { Indirect labor } & 160,000 & \text { Taxes } & 10,000 \
\text { Factory supplies } & 20,000 & \text { Supervision } & 40,000
\end{array}$ A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of

Accepted Answer

A) $270,000. 
B) $360,000. 
C) $370,000. 
D) $300,000. 
A) $270,000. 
B) $360,000. 
C) $370,000. 
D) $300,000.

Question 10

Sydney, Inc.uses flexible budgets.At normal capacity of 16,000 units, budgeted manufacturing overhead is $128,000 variable and $360,000 fixed.If Sydney had actual overhead costs of $500,000 for 18,000 units produced, what is the difference between actual and budgeted costs?

Accepted Answer

A) $4,000 unfavorable 
B) $4,000 favorable 
C) $12,000 unfavorable 
D) $16,000 favorable 
A) $4,000 unfavorable 
B) $4,000 favorable 
C) $12,000 unfavorable 
D) $16,000 favorable

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

Which one of the following will not increase return on investment?

Accepted Answer

A) Variable costs are increased 
B) An increase in sales 
C) Average operating assets are decreased 
D) Variable costs are decreased 
A) Variable costs are increased 
B) An increase in sales 
C) Average operating assets are decreased 
D) Variable costs are decreased

Question 13

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 14

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 15

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

Accepted Answer

A) True 
 B)False

Question 16

A profit center is

Accepted Answer

A) a responsibility center that always reports a profit. 
B) a responsibility center that incurs costs and generates revenues. 
C) evaluated by the rate of return earned on the investment allocated to the center. 
D) referred to as a loss center when operations do not meet the company's objectives. 
A) a responsibility center that always reports a profit. 
B) a responsibility center that incurs costs and generates revenues. 
C) evaluated by the rate of return earned on the investment allocated to the center. 
D) referred to as a loss center when operations do not meet the company's objectives.

Question 17

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 18

Which of the following is not a correct match?
1.	Incurs costs
2.	Generates revenue
3.	Controls investment funds

Accepted Answer

A) Investment Center........... 1, 2, 3 
B) Cost Center...................... 1 
C) Profit Center..................... 1, 2, 3 
D) All are correct matches. 
A) Investment Center........... 1, 2, 3 
B) Cost Center...................... 1 
C) Profit Center..................... 1, 2, 3 
D) All are correct matches.

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

A static budget is not appropriate in evaluating a manager's effectiveness if a company has

Accepted Answer

A) substantial fixed costs. 
B) substantial variable costs. 
C) planned activity levels that match actual activity levels. 
D) no variable costs. 
A) substantial fixed costs. 
B) substantial variable costs. 
C) planned activity levels that match actual activity levels. 
D) no variable costs.

A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost per unit × activity level).

Which statement is true?

The dollar amount of the controllable margin

Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.

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

A responsibility report for a profit center will

In computing ROI, land held for future use

Sydney, Inc.uses flexible budgets.At normal capacity of 16,000 units, budgeted manufacturing overhead is $128,000 variable and $360,000 fixed.If Sydney had actual overhead costs of $500,000 for 18,000 units produced, what is the difference between actual and budgeted costs?

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

Which one of the following will not increase return on investment?

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

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

A profit center is

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

Which of the following is not a correct match? 1. Incurs costs 2. Generates revenue 3. Controls investment funds

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

A static budget is not appropriate in evaluating a manager's effectiveness if a company has

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

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 Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

Filters

Exam 10: Reporting and Analyzing Liabilities

A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost per unit × activity level).

Which statement is true?

The dollar amount of the controllable margin

Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.

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

A responsibility report for a profit center will

In computing ROI, land held for future use

Sydney, Inc.uses flexible budgets.At normal capacity of 16,000 units, budgeted manufacturing overhead is $128,000 variable and $360,000 fixed.If Sydney had actual overhead costs of $500,000 for 18,000 units produced, what is the difference between actual and budgeted costs?

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

Which one of the following will not increase return on investment?

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

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

A profit center is

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

Which of the following is not a correct match? 1. Incurs costs 2. Generates revenue 3. Controls investment funds

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

A static budget is not appropriate in evaluating a manager's effectiveness if a company has

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

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 Stockholders Equity

Statement of Cash Flows

Financial Analysis: the Big Picture

Managerial Accounting

Time Value of Money

Filters