Question 1

Heerey Company produces men's ties. The following budgeted and actual amounts are for 2010:   
Instructions
Prepare a performance budget report for Heerey Company for the year.

Accepted Answer

The answer of Heerey Company produces men's ties. The following...

Question 2

A flexible budget can be prepared for each of the types of budgets included in the master budget.

Accepted Answer

A) True 
 B)False  True

Question 3

A static budget is one that is geared to one level of activity.

Accepted Answer

A) True 
 B)False  True

Question 4

The current controllable margin for Frederick Division is $62,000. Its current operating assets are $200,000. The division is considering purchasing equipment for $60,000 that will increase annual controllable margin by an estimated $10,000. If the equipment is purchased, what will happen to the return on investment for Frederick 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 5

DeLong Corporation recorded operating data for its Waterhole division for the year. DeLong requires its return to be 9%.   How much is ROI for the year?

Accepted Answer

A)  10% 
B)  16.7% 
C)  20% 
D)  30% 
A)  10% 
B)  16.7% 
C)  20% 
D)  30%

Question 6

Powers Company had average operating assets of $2,000,000 and sales of $1,000,000 in 2010. If the controllable margin was $300,000, the ROI was

Accepted Answer

A)  60% 
B)  50% 
C)  30% 
D)  15% 
A)  60% 
B)  50% 
C)  30% 
D)  15%

Question 7

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

Accepted Answer

corrective

Question 8

At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects the vertical axis at $20,000. At 10,000 direct labor hours, a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $60,000. Fixed and variable costs may be expressed as:

Accepted Answer

A)  $20,000 fixed plus $4 per direct labor hour variable. 
B)  $20,000 fixed plus $6 per direct labor hour variable. 
C)  $40,000 fixed plus $2 per direct labor hour variable. 
D)  $40,000 fixed plus $4 per direct labor hour variable. 
A)  $20,000 fixed plus $4 per direct labor hour variable. 
B)  $20,000 fixed plus $6 per direct labor hour variable. 
C)  $40,000 fixed plus $2 per direct labor hour variable. 
D)  $40,000 fixed plus $4 per direct labor hour variable.

Question 9

Flexible budgeting relies on the assumption that unit variable costs will remain constant within the relevant range of activity.

Accepted Answer

A) True 
 B)False

Question 10

Lounsbury Parts 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 11

The linens department of a large department store is

Accepted Answer

A)  not a responsibility center. 
B)  a profit center. 
C)  a cost center. 
D)  an investment center. 
A)  not a responsibility center. 
B)  a profit center. 
C)  a cost center. 
D)  an investment center.

Question 12

Most direct fixed costs are not controllable by the profit center manager.

Accepted Answer

A) True 
 B)False

Question 13

Under management by exception, which differences between planned and actual results should be investigated?

Accepted Answer

A)  Material and noncontrollable 
B)  Controllable and noncontrollable 
C)  Material and controllable 
D)  All differences should be investigated 
A)  Material and noncontrollable 
B)  Controllable and noncontrollable 
C)  Material and controllable 
D)  All differences should be investigated

Question 14

Burk Company recorded operating data for its shoe division for the year.   How much is ROI for the year if management is able to identify a way to improve the contribution margin by $20,000, assuming fixed costs are held constant?

Accepted Answer

A)  25% 
B)  18% 
C)  45% 
D)  12% 
A)  25% 
B)  18% 
C)  45% 
D)  12%

Question 15

Which of the following are financial measures of performance?
1) Controllable margin
2) Product quality
3) Labor productivity

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  1 and 3 
A)  1 
B)  2 
C)  3 
D)  1 and 3

Question 16

Neill Manufacturing reported the following items for 2010:   How much is controllable margin?

Accepted Answer

A)  $100,000 
B)  $60,000 
C)  $30,000 
D)  $10,000 
A)  $100,000 
B)  $60,000 
C)  $30,000 
D)  $10,000

Question 17

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.

Accepted Answer

A) True 
 B)False

Question 18

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 19

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 20

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

Accepted Answer

A) True 
 B)False

Exam 24: Budgetary Planning

Heerey Company produces men's ties. The following budgeted and actual amounts are for 2010: Instructions Prepare a performance budget report for Heerey Company for the year.

A flexible budget can be prepared for each of the types of budgets included in the master budget.

A static budget is one that is geared to one level of activity.

DeLong Corporation recorded operating data for its Waterhole division for the year. DeLong requires its return to be 9%. How much is ROI for the year?

Powers Company had average operating assets of $2,000,000 and sales of $1,000,000 in 2010. If the controllable margin was $300,000, the ROI was

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

At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects the vertical axis at $20,000. At 10,000 direct labor hours, a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $60,000. Fixed and variable costs may be expressed as:

Flexible budgeting relies on the assumption that unit variable costs will remain constant within the relevant range of activity.

The linens department of a large department store is

Most direct fixed costs are not controllable by the profit center manager.

Under management by exception, which differences between planned and actual results should be investigated?

Burk Company recorded operating data for its shoe division for the year. How much is ROI for the year if management is able to identify a way to improve the contribution margin by $20,000, assuming fixed costs are held constant?

Which of the following are financial measures of performance? 1) Controllable margin 2) Product quality 3) Labor productivity

Neill Manufacturing reported the following items for 2010: How much is controllable margin?

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.

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

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

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

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 Analysis: the Big Picture

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Incremental Analysis

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Filters

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