Exam 24: Budgetary Planning

An investment center generated a contribution margin of $200,000, fixed costs of $100,000 and sales of $1,000,000. The center's average operating assets were $400,000. How much is the return on investment?

Ramirez Manufacturing Inc. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows. Instructions (a) Compute the missing amounts. Show computations. (b) Prepare a responsibility report for the Women's Shoe Division assuming (1) the data are for the month ended June 30, 2010, and (2) all data equal budget except variable costs which are $15,000 over budget.

The flexible budget report evaluates a manager's performance in two areas: (1) production and (2) costs.

Which of the following is not a true statement?

The master budget is not used in the budgetary control process.

A flexible budget can be prepared for which of the following budgets comprising the master budget?

Kraus Company uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are: Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. The actual selling expenses incurred in February, 2010, by Molle Company are as follows: Fixed selling expenses consist of sales salaries $41,000 and depreciation on delivery equipment $10,000. Instructions Prepare a flexible budget performance report, assuming that February sales were $220,000.

The purpose of the sales budget report is to

In the Harrelson Company, indirect labor is budgeted for $36,000 and factory supervision is budgeted for $12,000 at normal capacity of 80,000 direct labor hours. If 90,000 direct labor hours are worked, flexible budget total for these costs is

The use of budgets in controlling operations is known as ________________.

The master budget is a __________________ budget which is based on operating at one budgeted activity level.

The foreign subsidiary of a large corporation is

Kraus Company uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $200,000 to $240,000. Variable costs and their percentage relationships to sales are: Fixed selling expenses consist of sales salaries $40,000 and depreciation on delivery equipment $10,000. Instructions Prepare a flexible budget for increments of $20,000 of sales within the relevant range.

The comparison of differences between actual and planned results

A measure frequently used to evaluate the performance of the manager of an investment center is

A company's planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of

If actual results are different from planned results, the difference must always be investigated by management to achieve effective budgetary control.

Miles Company had average operating assets of $4,000,000 and sales of $2,000,000 in 2010. If the controllable margin was $400,000, the ROI was

Sager Company's budgeted sales for April were estimated at $500,000, sales commissions at 4% of sales, and the sales manager's salary at $80,000. Shipping expenses were estimated at 1% of sales and miscellaneous selling expenses were estimated at $1,000, plus 0.5% of sales. Instructions Determine the budgeted selling expenses on a flexible budget for April.

Reimer Division's operating results include: $\bullet$ Controllable margin, $150,000 $\bullet$ Sales revenue, $1,200,000 $\bullet$ Operating assets, $500,000 Reimer is considering a project with sales of $120,000, expenses of $84,000, and an investment of $180,000. Reimer's required rate of return is 15%. Instructions Determine whether Reimer should accept this project.