Question 1

The manager of an investment center can improve ROI by reducing average operating assets.

Accepted Answer

A) True 
 B)False

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

The flexible budget

Accepted Answer

A)  is prepared before the master budget. 
B)  is relevant both within and outside the relevant range. 
C)  eliminates the need for a master budget. 
D)  is a series of static budgets at different levels of activity. 
A)  is prepared before the master budget. 
B)  is relevant both within and outside the relevant range. 
C)  eliminates the need for a master budget. 
D)  is a series of static budgets at different levels of activity.

Question 4

Point Inc. produces men's shirts. The following budgeted and actual amounts are for 2016: $\begin{array}{lrr}\text { Cost }& \text { Budget at 2,500 units }& \text {Actual Amounts at 2,800 units }\\hline
\text { Direct materials } & \$ 65,000 & \$ 75,000 \
\text { Direct labor } & 70,000 & 78,000 \
\text { Fixed overhead } & 35,000 & 34,500
\end{array}$ Instructions
Prepare a performance report for Point Inc. for the year.

Accepted Answer

The answer of Point Inc. produces men's shirts. The following...

Question 5

For June Gold Corp. estimated sales revenue at $600000. It pays sales commissions that are 4% of sales. The sales manager's salary is $285000 estimated shipping expenses total 1% of sales and miscellaneous selling expenses are $15000. How much are budgeted selling expenses for the month of July if sales are expected to be $540000?

Accepted Answer

A)  $42000 
B)  $327000 
C)  $27000 
D)  $330000 
A)  $42000 
B)  $327000 
C)  $27000 
D)  $330000

Question 6

In analyzing differences from planned objectives management may take ___________________ or it could decide to modify ___________________.

Accepted Answer

corrective

Question 7

Assume that actual sales results exceed the planned results for the second quarter. This favorable difference is greater than the unfavorable difference reported for the first quarter sales. Which of the following statements about the sales budget report on June 30 is true?

Accepted Answer

A)  The year-to-date results will show a favorable difference. 
B)  The year-to-date results will show an unfavorable difference. 
C)  The difference for the first quarter can be ignored. 
D)  The sales report is not useful if it shows a favorable and unfavorable difference for the two quarters. 
A)  The year-to-date results will show a favorable difference. 
B)  The year-to-date results will show an unfavorable difference. 
C)  The difference for the first quarter can be ignored. 
D)  The sales report is not useful if it shows a favorable and unfavorable difference for the two quarters.

Question 8

Top management can control

Accepted Answer

A)  only controllable costs. 
B)  only noncontrollable costs. 
C)  all costs. 
D)  some noncontrollable costs and all controllable costs. 
A)  only controllable costs. 
B)  only noncontrollable costs. 
C)  all costs. 
D)  some noncontrollable costs and all controllable costs.

Question 9

All of the following statements are correct about controllable costs except

Accepted Answer

A)  all costs are controllable at some level of responsibility within a company. 
B)  all costs are controllable by top management. 
C)  fewer costs are controllable as one moves up to each higher level of managerial responsibility. 
D)  costs incurred directly by a level of responsibility are controllable at that level. 
A)  all costs are controllable at some level of responsibility within a company. 
B)  all costs are controllable by top management. 
C)  fewer costs are controllable as one moves up to each higher level of managerial responsibility. 
D)  costs incurred directly by a level of responsibility are controllable at that level.

Question 10

Data for the following subsidiaries of Olive Manufacturing which are operated as investment centers are as follows: $$\begin{array} { l c c } 
& \text { Fleming Company } & \text { Oak Company } \
\text { Sales } & \$ 3,000,000 & \$ 2,000,000 \
\text { Controllable margin } & ( 1 ) & ( 3 ) \
\text { Average operating assets } & ( 2 ) & 4,000,000 \
\text { Contribution margin } & 1,200,000 & 800,000 \
\text { Controllable fixed costs } & 500,000 & 200,000 \
\text { Return on Investment } & 10 \% & ( 4 )
\end{array}$$ Instructions
Compute the missing amounts using the ROI formula.

Accepted Answer

(1) Controllable margin @#LAT-DLM&
(2) A

Question 11

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

Accepted Answer

A) True 
 B)False

Question 12

If a company plans to sell 48000 units of product but sells 60000 the most appropriate comparison of the cost data associated with the sales will be by a budget based on

Accepted Answer

A)  the original planned level of activity. 
B)  54000 units of activity. 
C)  60000 units of activity. 
D)  48000 units of activity. 
A)  the original planned level of activity. 
B)  54000 units of activity. 
C)  60000 units of activity. 
D)  48000 units of activity.

Question 13

Brad Ventura is confused about how a flexible budget is prepared. Identify the steps for Brad.

Accepted Answer

The steps in preparing a flexible budget

Question 14

A responsibility report should

Accepted Answer

A)  be prepared in accordance with generally accepted accounting principles. 
B)  show only those costs that a manager can control. 
C)  only show variable costs. 
D)  only be prepared at the highest level of managerial responsibility. 
A)  be prepared in accordance with generally accepted accounting principles. 
B)  show only those costs that a manager can control. 
C)  only show variable costs. 
D)  only be prepared at the highest level of managerial responsibility.

Question 15

Betsy Union is the Pika Division manager and her performance is evaluated by executive management based on Division ROI. The current controllable margin for Pika Division is $46000. Its current operating assets total $210000. The division is considering purchasing equipment for $40000 that will increase sales by an estimated $10000 with annual depreciation of $10000. If the equipment is purchased what will happen to the return on investment for the division?

Accepted Answer

A)  An increase of 0.5% 
B)  A decrease of 0.5% 
C)  A decrease of 3.5% 
D)  It will remain unchanged. 
A)  An increase of 0.5% 
B)  A decrease of 0.5% 
C)  A decrease of 3.5% 
D)  It will remain unchanged.

Question 16

If costs are not responsive to changes in activity level then these costs can be best described as

Accepted Answer

A)  mixed. 
B)  flexible. 
C)  variable. 
D)  fixed. 
A)  mixed. 
B)  flexible. 
C)  variable. 
D)  fixed.

Question 17

Shane Industries prepared a fixed budget of 60000 direct labor hours with estimated overhead costs of $300000 for variable overhead and $90000 for fixed overhead. Shane then prepared a flexible budget at 57000 labor hours. How much is total overhead costs at this level of activity?

Accepted Answer

A)  $285000 
B)  $375000 
C)  $370500 
D)  $390000 
A)  $285000 
B)  $375000 
C)  $370500 
D)  $390000

Question 18

Rhein Manufacturing recorded operating data for its auto accessories division for the year. $$\begin{array} { l r } 
\text { Sales } & \$ 750,000 \
\text { Contribution margin } & 150,000 \
\text { Total direct fixed costs } & 90,000 \
\text { Average total operating assets } & 400,000
\end{array}$$ How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30000 assuming fixed costs are held constant?

Accepted Answer

A)  45.0% 
B)  22.5% 
C)  15.0% 
D)  12.0% 
A)  45.0% 
B)  22.5% 
C)  15.0% 
D)  12.0%

Question 19

A cost item is considered to be controllable if there is not a large difference between actual cost and budgeted cost for that item.

Accepted Answer

A) True 
 B)False

Question 20

The Fulmar Division of Jayne Manufacturing had an ROI of 25% when sales were $3 million and controllable margin was $600000. What were the average operating assets?

Accepted Answer

A)  $150000 
B)  $750000 
C)  $2400000 
D)  $12000 
A)  $150000 
B)  $750000 
C)  $2400000 
D)  $12000

Exam 24: Budgetary Control and Responsibility Accounting

The manager of an investment center can improve ROI by reducing average operating assets.

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

The flexible budget

In analyzing differences from planned objectives management may take ___________________ or it could decide to modify ___________________.

Assume that actual sales results exceed the planned results for the second quarter. This favorable difference is greater than the unfavorable difference reported for the first quarter sales. Which of the following statements about the sales budget report on June 30 is true?

Top management can control

All of the following statements are correct about controllable costs except

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

If a company plans to sell 48000 units of product but sells 60000 the most appropriate comparison of the cost data associated with the sales will be by a budget based on

Brad Ventura is confused about how a flexible budget is prepared. Identify the steps for Brad.

A responsibility report should

If costs are not responsive to changes in activity level then these costs can be best described as

Shane Industries prepared a fixed budget of 60000 direct labor hours with estimated overhead costs of $300000 for variable overhead and $90000 for fixed overhead. Shane then prepared a flexible budget at 57000 labor hours. How much is total overhead costs at this level of activity?

A cost item is considered to be controllable if there is not a large difference between actual cost and budgeted cost for that item.

The Fulmar Division of Jayne Manufacturing had an ROI of 25% when sales were $3 million and controllable margin was $600000. What were the 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

Filters

In analyzing differences from planned objectives management may take _ or it could decide to modify _.