Exam 24: Budgetary Planning

Nichols Inc. reported the following items for 2010: Instructions Compute the controllable margin for 2010.

A static budget is appropriate for

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

True Masons budgeted costs for 25,000 linear feet of block are: True Masons installed 20,000 linear feet of block during March. How much is budgeted total manufacturing costs in March?

Cost centers, profit centers, and investment centers can all be classified as responsibility centers.

Controllable margin is most useful for

A static budget is changed only when actual activity is different from the level of activity expected.

Hudson Roofing's budgeted manufacturing costs for 25,000 squares of shingles are: Fixed manufacturing costs $15,000 Variable manufacturing costs $20.00 per square Hudson produced 20,000 squares of shingles during March. How much are budgeted total manufacturing costs in March?

Data concerning manufacturing overhead for Barkley Company are presented below. The Mixing Department is a cost center. An analysis of the overhead costs reveals that all variable costs are controllable by the manager of the Mixing Department and that 50% of supervisory costs are controllable at the department level. The flexible budget formula and the cost and activity for the months of July and August are as follows: Instructions (a) Prepare the responsibility reports for the Mixing Department for each month. (b) Comment on the manager's performance in controlling costs during the two month period.

The denominator in the formula for return on investment calculation is

Top management can control

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?

In the formula for ROI, idle plant assets are

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

If a company plans to sell 24,000 units of product but sells 30,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on

Match the items below by entering the appropriate code letter in the space provided. A. Budgetary control G. Responsibility reporting system B. Static budget H. Return on Investment C. Flexible budget I. Profit center D. Responsibility accounting J. Investment center E. Controllable costs K. Indirect fixed costs F. Management by exception L. Direct fixed costs ____ 1. The review of budget reports by top management directed entirely or primarily to differences between actual results and planned objectives. ____ 2. 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. ____ 3. The preparation of reports for each level of responsibility shown in the company's organization chart. ____ 4. A projection of budget data at one level of activity. ____ 5. Costs that a manager has the authority to incur within a given period of time. ____ 6. The use of budgets to control operations. ____ 7. A projection of budget data for various levels of activity. ____ 8. A responsibility center that incurs costs, generates revenues, and has control over the investment funds available for use. ____ 9. Costs that relate specifically to a responsibility center and are incurred for the sole benefit of the center. ____ 10. A responsibility center that incurs costs and also generates revenues. ____ 11. Costs which are incurred for the benefit of more than one profit center. ____ 12. A measure of the profitability of an investment center computed by dividing controllable margin (in dollars) by average operating assets.

If an investment center has generated a controllable margin of $75,000 and sales of $300,000, what is the return on investment for the investment center if average operating assets were $500,000 during the period?

Responsibility centers may be classified into three types: (1)____________________, (2)___________________ and, (3)____________________.

Return on investment is calculated by dividing _________________________ by ________________________.

Controllable margin is defined as