Question 1

Which of the following will cause an increase in ROI?

Accepted Answer

A)  An increase in variable costs 
B)  An increase in average operating assets 
C)  An increase in sales 
D)  An increase in controllable fixed costs 
A)  An increase in variable costs 
B)  An increase in average operating assets 
C)  An increase in sales 
D)  An increase in controllable fixed costs

Question 2

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 3

Given below is an excerpt from a management performance report: $\begin{array}{lccc}&\text { Budget }&\text {Actual }&\text {Difference }\
\text { Contribution margin } & \$ 1,000,000 & \$ 1,050,000 & \$ 50,000 \
\text { Controllable fixed costs } & \$ 500,000 & \$ 450,000 & \$ 50,000
\end{array}$ 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 4

The primary basis for evaluating the performance of a manager of an investment center is _________________.

Accepted Answer

return on

Question 5

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 = $24000 operating assets = $400000
Project B - Annual controllable margin = $60000 operating assets = $550000
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 6

Match between columns
                        Premises: The review of budget reports by top management directed entirely or primarily to differences between actual results and planned objectives.
A part of management accounting that involves accumulating and reporting revenues and costs on the basis of the individual manager who has the authority to make the day-to-day decisions about the items.
The preparation of reports for each level of responsibility shown in the company’s organization chart.
A projection of budget data at one level of activity.
Costs that a manager has the authority to incur within a given period of time.
The use of budgets to control operations.
A projection of budget data for various levels of activity.
A responsibility center that incurs costs, generates revenues, and has control over the investment funds available for use.
Costs that relate specifically to a responsibility center and are incurred for the sole benefit of the center.
A responsibility center that incurs costs and also generates revenues.
Costs which are incurred for the benefit of more than one profit center.
A measure of the profitability of an investment center computed by dividing controllable margin (in dollars) by average operating assets.

Accepted Answer

The Answer of Budgetary control and Static budget and Flexible is...

Question 7

Stone Industries uses flexible budgets. At normal capacity of 16000 units budgeted manufacturing overhead is: $48000 variable and $270000 fixed. If Stone had actual overhead costs of $321000 for 18000 units produced what is the difference between actual and budgeted costs?

Accepted Answer

A)  $3000 unfavorable 
B)  $3000 favorable 
C)  $9000 unfavorable 
D)  $12000 favorable 
A)  $3000 unfavorable 
B)  $3000 favorable 
C)  $9000 unfavorable 
D)  $12000 favorable

Question 8

Chambers Inc. uses flexible budgets. At normal capacity of 16000 units budgeted manufacturing overhead is: $64000 variable and $180000 fixed. If Chambers had actual overhead costs of $250000 for 18000 units produced what is the difference between actual and budgeted costs?

Accepted Answer

A)  $2000 unfavorable. 
B)  $2000 favorable. 
C)  $6000 unfavorable. 
D)  $8000 favorable. 
A)  $2000 unfavorable. 
B)  $2000 favorable. 
C)  $6000 unfavorable. 
D)  $8000 favorable.

Question 9

Lapp Manufacturing uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $400000 to $480000. Variable costs and their percentage relationships to sales are: $$\begin{array} { l l } 
\text { Sales commissions } & 6 \% \
\text { Advertising } & 4 \% \
\text { Traveling } & 5 \% \
\text { Delivery } & 1 \%
\end{array}$$ Fixed selling expenses consist of sales salaries $80000 and depreciation on delivery equipment $20000.
Instructions
Prepare a flexible budget for increments of $40000 of sales within the relevant range.

Accepted Answer

The answer of Lapp Manufacturing uses flexible budgets to control...

Question 10

The data for an investment center is given below.   The controllable margin is $440000.
Instructions
Compute the return on investment for the center for 2016.

Accepted Answer

Average current assets ($40000

Question 11

Cody Co. developed its annual manufacturing overhead budget for its master budget for 2016 as follows: $\begin{array}{lc}
\text {Expected annual operating capacity }&\text {120,000 Direct Labor Hours}\ 
\text {Variable overhead costs}\
\text { Indirect labor } & \$ 600,000 \
\text { Indirect materials } & 120,000 \
\text { Factory supplies } & 60,000 \
 \text { Total variable } & \underline{780,000} \
\text { Fixed overhead costs }\
\text { Depreciation } & 240,000 \
\text { Supervision } & 120,000 \
\text { Property taxes } & 96,000 \
\quad \text { Total fixed } & 456,000\
\text { Total costs}& \$ 1.236000
\end{array}$ The relevant range for monthly activity is expected to be between 8000 and 12000 direct labor hours.
Instructions
Prepare a flexible budget for a monthly activity level of 8000 and 9000 direct labor hours.

Accepted Answer

The answer of Cody Co. developed its annual manufacturing overhead...

Question 12

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 13

At zero direct labor hours in a flexible budget graph the total budgeted cost line intersects the vertical axis at $30000. At 15000 direct labor hours a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $90000. Fixed and variable costs may be expressed as:

Accepted Answer

A)  $30000 fixed plus $4 per direct labor hour variable. 
B)  $30000 fixed plus $6 per direct labor hour variable. 
C)  $60000 fixed plus $2 per direct labor hour variable. 
D)  $60000 fixed plus $4 per direct labor hour variable. 
A)  $30000 fixed plus $4 per direct labor hour variable. 
B)  $30000 fixed plus $6 per direct labor hour variable. 
C)  $60000 fixed plus $2 per direct labor hour variable. 
D)  $60000 fixed plus $4 per direct labor hour variable.

Question 14

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 15

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 16

Kevin Jarvis Industries produced 192000 units in 90000 direct labor hours. Production for the period was estimated at 198000 units and 99000 direct labor hours. A flexible budget would compare budgeted costs and actual costs respectively at

Accepted Answer

A)  96000 hours and 99000 hours. 
B)  99000 hours and 90000 hours. 
C)  96000 hours and 90000 hours. 
D)  90000 hours and 90000 hours. 
A)  96000 hours and 99000 hours. 
B)  99000 hours and 90000 hours. 
C)  96000 hours and 90000 hours. 
D)  90000 hours and 90000 hours.

Question 17

A cost is considered controllable at a given level of managerial responsibility if

Accepted Answer

A)  the manager has the power to incur the cost within a given time period. 
B)  the cost has not exceeded the budget amount in the master budget. 
C)  it is a variable cost but it is uncontrollable if it is a fixed cost. 
D)  it changes in magnitude in a flexible budget. 
A)  the manager has the power to incur the cost within a given time period. 
B)  the cost has not exceeded the budget amount in the master budget. 
C)  it is a variable cost but it is uncontrollable if it is a fixed cost. 
D)  it changes in magnitude in a flexible budget.

Question 18

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 19

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 20

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

Accepted Answer

A) True 
 B)False

Exam 24: Budgetary Control and Responsibility Accounting

Which of the following will cause an increase in ROI?

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

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 primary basis for evaluating the performance of a manager of an investment center is _________________.

Stone Industries uses flexible budgets. At normal capacity of 16000 units budgeted manufacturing overhead is: $48000 variable and $270000 fixed. If Stone had actual overhead costs of $321000 for 18000 units produced what is the difference between actual and budgeted costs?

Chambers Inc. uses flexible budgets. At normal capacity of 16000 units budgeted manufacturing overhead is: $64000 variable and $180000 fixed. If Chambers had actual overhead costs of $250000 for 18000 units produced what is the difference between actual and budgeted costs?

The data for an investment center is given below. The controllable margin is $440000. Instructions Compute the return on investment for the center for 2016.

A responsibility report for a profit center will

At zero direct labor hours in a flexible budget graph the total budgeted cost line intersects the vertical axis at $30000. At 15000 direct labor hours a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $90000. Fixed and variable costs may be expressed as:

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

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

Kevin Jarvis Industries produced 192000 units in 90000 direct labor hours. Production for the period was estimated at 198000 units and 99000 direct labor hours. A flexible budget would compare budgeted costs and actual costs respectively at

A cost is considered controllable at a given level of managerial responsibility if

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

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

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

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Planning

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

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