Question 1

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 2

The selection of levels of activity to depict a flexible budget
1) will be within the relevant range.
2) is largely a matter of expediency.
3) is governed by generally accepted accounting principles.

Accepted Answer

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

Question 3

Worley Company uses flexible budgets. Items from the budget for March in which 2,000 units were produced and sold appear below:   
Instructions
If Worley prepares a flexible budget at 3,000 units, compute its total variable cost.

Accepted Answer

Variable cost per unit: ($18,0

Question 4

Michaelson Company recorded operating data for its auto accessories 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 $15,000, 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 5

A static budget is usually appropriate in evaluating a manager's effectiveness in controlling

Accepted Answer

A)  fixed manufacturing costs and fixed selling and administrative expenses. 
B)  variable manufacturing costs and variable selling and administrative expenses. 
C)  fixed manufacturing costs and variable selling and administrative expenses. 
D)  variable manufacturing costs and fixed selling and administrative expenses. 
A)  fixed manufacturing costs and fixed selling and administrative expenses. 
B)  variable manufacturing costs and variable selling and administrative expenses. 
C)  fixed manufacturing costs and variable selling and administrative expenses. 
D)  variable manufacturing costs and fixed selling and administrative expenses.

Question 6

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 7

Total ________________ costs will be the same on the master budget and on a flexible budget which reflects the actual level of activity.

Accepted Answer

The answer of Total ________________ costs will be the same...

Question 8

A flexible budget

Accepted Answer

A)  is prepared when management cannot agree on objectives for the company. 
B)  projects budget data for various levels of activity. 
C)  is only useful in controlling fixed costs. 
D)  cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results. 
A)  is prepared when management cannot agree on objectives for the company. 
B)  projects budget data for various levels of activity. 
C)  is only useful in controlling fixed costs. 
D)  cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results.

Question 9

The master budget of Rondelli Company shows that the planned activity level for next year is expected to be 50,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:   A flexible budget for a level of activity of 60,000 machine hours would show total manufacturing overhead costs of

Accepted Answer

A)  $494,000. 
B)  $420,000. 
C)  $504,000. 
D)  $454,000. 
A)  $494,000. 
B)  $420,000. 
C)  $504,000. 
D)  $454,000.

Question 10

Kenco Pharmaceuticals is evaluating its Brown division, an investment center. The division has a $45,000 controllable margin and $300,000 of sales. How much will Kenco's average operating assets be when its return on investment is 10%?

Accepted Answer

A)  $450,000 
B)  $495,000 
C)  $300,000 
D)  $255,000 
A)  $450,000 
B)  $495,000 
C)  $300,000 
D)  $255,000

Question 11

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.

Question 12

Controllable margin is subtracted from controllable fixed costs to get net income for a profit center.

Accepted Answer

A) True 
 B)False

Question 13

The Western Division of Guinn Corp. had an ROI of 25% when sales were $1 million and controllable margin was $200,000. What were the average operating assets?

Accepted Answer

A)  $50,000 
B)  $250,000 
C)  $800,000 
D)  $4,000 
A)  $50,000 
B)  $250,000 
C)  $800,000 
D)  $4,000

Question 14

Janes Corporation recorded operating data for its Cheap division for the year. Janes requires its return to be 10%.   What is the ROI for the year?

Accepted Answer

A)  4% 
B)  35% 
C)  -6% 
D)  1.5% 
A)  4% 
B)  35% 
C)  -6% 
D)  1.5%

Question 15

What is the primary difference between a static budget and a flexible budget?

Accepted Answer

A)  The static budget contains only fixed costs, while the flexible budget contains only variable costs. 
B)  The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels. 
C)  The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management. 
D)  The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold. 
A)  The static budget contains only fixed costs, while the flexible budget contains only variable costs. 
B)  The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels. 
C)  The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management. 
D)  The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold.

Question 16

If an investment center has a $45,000 controllable margin and $600,000 of sales, what average operating assets are needed to have a return on investment of 10%?

Accepted Answer

A)  $60,000 
B)  $105,000 
C)  $450,000 
D)  $600,000 
A)  $60,000 
B)  $105,000 
C)  $450,000 
D)  $600,000

Question 17

The best measure of the performance of the manager of a profit center is the

Accepted Answer

A)  rate of return on investment. 
B)  success in meeting budgeted goals for controllable costs. 
C)  amount of controllable margin generated by the profit center. 
D)  amount of contribution margin generated by the profit center. 
A)  rate of return on investment. 
B)  success in meeting budgeted goals for controllable costs. 
C)  amount of controllable margin generated by the profit center. 
D)  amount of contribution margin generated by the profit center.

Question 18

On the basis of the budget reports,

Accepted Answer

A)  management analyzes differences between actual and planned results. 
B)  management may take corrective action. 
C)  management may modify the future plans. 
D)  all of these. 
A)  management analyzes differences between actual and planned results. 
B)  management may take corrective action. 
C)  management may modify the future plans. 
D)  all of these.

Question 19

The data for an investment center is given below.   
The controllable margin is $615,000.
Instructions
Compute the return on investment for the center for 2010.

Accepted Answer

Average current assets ($400,0

Question 20

What is budgetary control?

Accepted Answer

A)  Another name for a flexible budget 
B)  The degree to which the CFO controls the budget 
C)  The use of budgets in controlling operations 
D)  The process of providing information on budget differences to lower level managers 
A)  Another name for a flexible budget 
B)  The degree to which the CFO controls the budget 
C)  The use of budgets in controlling operations 
D)  The process of providing information on budget differences to lower level managers

Exam 24: Budgetary Planning

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

The selection of levels of activity to depict a flexible budget 1) will be within the relevant range. 2) is largely a matter of expediency. 3) is governed by generally accepted accounting principles.

Worley Company uses flexible budgets. Items from the budget for March in which 2,000 units were produced and sold appear below: Instructions If Worley prepares a flexible budget at 3,000 units, compute its total variable cost.

Michaelson Company recorded operating data for its auto accessories 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 $15,000, assuming fixed costs are held constant?

A static budget is usually appropriate in evaluating a manager's effectiveness in controlling

A responsibility report for a profit center will

Total ________________ costs will be the same on the master budget and on a flexible budget which reflects the actual level of activity.

A flexible budget

Kenco Pharmaceuticals is evaluating its Brown division, an investment center. The division has a $45,000 controllable margin and $300,000 of sales. How much will Kenco's average operating assets be when its return on investment is 10%?

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

Controllable margin is subtracted from controllable fixed costs to get net income for a profit center.

The Western Division of Guinn Corp. had an ROI of 25% when sales were $1 million and controllable margin was $200,000. What were the average operating assets?

Janes Corporation recorded operating data for its Cheap division for the year. Janes requires its return to be 10%. What is the ROI for the year?

What is the primary difference between a static budget and a flexible budget?

If an investment center has a $45,000 controllable margin and $600,000 of sales, what average operating assets are needed to have a return on investment of 10%?

The best measure of the performance of the manager of a profit center is the

On the basis of the budget reports,

The data for an investment center is given below. The controllable margin is $615,000. Instructions Compute the return on investment for the center for 2010.

What is budgetary control?

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

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