Exam 24: Budgetary Control and Responsibility Accounting

Costs incurred indirectly and allocated to a responsibility level are considered to be

A flexible budget is prepared before the master budget.

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

The denominator in the formula for return on investment calculation is

In computing ROI land held for future use

Copper Manufacturing has prepared the following monthly flexible manufacturing overhead budget for its Mixing Department: Instructions Prepare a flexible budget at the 5000 direct labor hours of activity.

Dingo Division's operating results include: controllable margin of $150000 sales totaling $1200000 and average operating assets of $500000. Dingo is considering a project with sales of $100000 expenses of $86000 and an investment of average operating assets of $200000. Dingo's required rate of return is 9%. Should Dingo accept this project?

Devlin Manufacturing makes a single product. Expected manufacturing costs are as follows: Variable costs Direct materials \ 6.50 per unit Direct labor 2.40 per unit Manufacturing overhead 1.10 per unit Fixed costs per month Supervisory salaries \ 13,600 Depreciation 5,500 Other fixed costs 2,200 Instructions Determine the amount of manufacturing costs for a flexible budget level of 3200 units per month.

In a responsibility accounting reporting system as one moves up each level of responsibility in an organization the responsibility reports become more summarized and show less detailed information.

Benet Division of United Refinery Company's operating results include: controllable margin $200000; sales $2200000; and operating assets $800000. The Benet Division's ROI is 25%. Management is considering a project with sales of $100000 variable expenses of $60000 fixed costs of $40000; and an asset investment of $150000. Should management accept this new project?

Webb Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: Indirect labor \ 5.00 Indirect materials 2.50 Maintenance .50 Utilities .30 Fixed overhead costs per month are: Supervision \ 1,200 Insurance 400 Propery taxes 600 Depreciation 1,800 The company believes it will normally operate in a range of 4000 to 8000 machine hours per month. During the month of August 2016 the company incurs the following manufacturing overhead costs: Indirect labor \ 28,000 Indirect materials 16,200 Maintenance 2,800 Utilities 1,900 Supervision 1,440 Insurance 400 Property taxes 600 Depreciation 1,860 Instructions Prepare a flexible budget report assuming that the company used 6000 machine hours during August.

Decentralization means that the control of operations is delegated by top management to many individuals throughout the organization.

The Medford Burkett Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes Taxis and Limos. Segment performance is measured using a system of responsibility reports and return on investment calculations. The allocation of resources within the company and the segment managers' bonuses are based in part on the results shown in these reports. Recently the company was the victim of a computer virus that deleted portions of the company's accounting records. This was discovered when the current period's responsibility reports were being prepared. The printout of the actual operating results appeared as follows. Planes Taxis Limos Service revenue \ ? \ 450,000 \ ? Variable costs 5,000,000 ? 320,000 Contribution margin ? 180,000 380,000 Controllable fixed costs 1,500,000 ? ? Controllable margin ? 70,000 176,000 Average operating assets 25,000,000 ? 1,600,000 Return on investment 12\% 10\% ? Instructions Determine the missing pieces of information above.

Not-for-profit entities

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

Data for the Deluxe Division of Park Industries which is operated as an investment center follows: Sales \ 6,000,000 Contribution Margin 800,000 Controllable Fixed Costs 440,000 Return on Investment 12\% Instructions Calculate controllable margin and average operating assets.

Budget reports should be prepared

As one moves up to each higher level of managerial responsibility

Lombard, Inc. has two investment centers and has developed the following information: Department A Department B Departmental controllable margin \ 120,000 ? Average operating assets ? \ 400,000 Sales 800,000 250,000 ROI 10\% 12\% Answer the following questions about Department A and Department B. 1. What was the amount of Department A's average operating assets? $____________. 2. What was the amount of Department B's controllable margin? $____________. 3. If Department B is able to reduce its operating assets by $100000 Department B's new ROI would be ____________. 4. If Department A is able to increase its controllable margin by $60000 as a result of reducing variable costs Department A's new ROI would be _________________.

Strickland Corp.'s manufacturing overhead budget for the first quarter of 2016 contained the following data: Fixed Costs Supervisor's salary \ 80,000 Depreciation 16,000 Property taxes 8,000 Actual variable costs for the first quarter were: Indirect materials \ 37,200 Indirect labor 26,400 Utilities 21,000 Maintenance 10,600 Actual fixed costs were as expected except for property taxes which were $9000. All costs are considered controllable by the department manager except for the supervisor's salary. Instructions Prepare a manufacturing overhead responsibility performance report for the first quarter.