Question 1

A cost center incurs costs and generates revenues and cost center managers are evaluated on the profitability of their centers.

Accepted Answer

A) True 
 B)False

Question 2

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 3

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 4

Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.

Accepted Answer

A) True 
 B)False

Question 5

Dingo Division's operating results include: controllable margin of $150000 sales totaling $1200000 and average operating assets of $500000.Dingo is considering a project with sales of $100000 expenses of $86000 and an investment of average operating assets of $200000.Dingo's required rate of return is 9%.Should Dingo accept this project?

Accepted Answer

A) Yes ROI will drop by 6.6% which is still above the minimum required rate of return. 
B) No the return is less than the required rate of 9%. 
C) Yes ROI still exceeds the cost of capital. 
D) No ROI will decrease to 7%. 
A) Yes ROI will drop by 6.6% which is still above the minimum required rate of return. 
B) No the return is less than the required rate of 9%. 
C) Yes ROI still exceeds the cost of capital. 
D) No ROI will decrease to 7%.

Question 6

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 7

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 8

A static budget is most useful for evaluating a manager's performance in controlling variable costs.

Accepted Answer

A) True 
 B)False

Question 9

A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost per unit × activity level).

Accepted Answer

A) True 
 B)False

Question 10

The activity index used in preparing a flexible budget should not influence the variable costs that are being budgeted.

Accepted Answer

A) True 
 B)False

Question 11

A company's planned activity level for next year is expected to be 100000 machine hours.At this level of activity the company budgeted the following manufacturing overhead costs: $\begin{array}{l}
\begin{array}{lr}
\quad\quad\quad\text { Variable }\
 \hline  \text { Indirect materials } & \$ 120,000 \
\text { Indirect labor } &160,000 \
\text { Factory supplies } & 20,000
\end{array}\
\begin{array}{l}
\quad\quad\quad\quad\text { Fixed }\
\hline \text { Depreciation } & \$ 50,000 \
\text { Taxes } & 10,000 \
\text { Supervision } & 40,000
\end{array}
\end{array}$ A flexible budget prepared at the 90000 machine hours level of activity would show total manufacturing overhead costs of

Accepted Answer

A) $270000. 
B) $360000. 
C) $370000. 
D) $300000. 
A) $270000. 
B) $360000. 
C) $370000. 
D) $300000.

Question 12

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

Question 13

In the performance report for cost centers

Accepted Answer

A) controllable and noncontrollable costs are reported. 
B) fixed costs are not reported. 
C) no distinction is made between fixed and variable costs. 
D) only materials and controllable costs are reported. 
A) controllable and noncontrollable costs are reported. 
B) fixed costs are not reported. 
C) no distinction is made between fixed and variable costs. 
D) only materials and controllable costs are reported.

Question 14

The activity index used in preparing the flexible budget

Accepted Answer

A) is prescribed by generally accepted accounting principles. 
B) is only applicable to fixed manufacturing costs. 
C) is the same for all departments. 
D) should significantly influence the costs that are being budgeted. 
A) is prescribed by generally accepted accounting principles. 
B) is only applicable to fixed manufacturing costs. 
C) is the same for all departments. 
D) should significantly influence the costs that are being budgeted.

Question 15

A department has budgeted monthly manufacturing overhead cost of $540000 plus $3 per direct labor hour.If a flexible budget report reflects $1044000 for total budgeted manufacturing cost for the month the actual level of activity achieved during the month was

Accepted Answer

A) 528000 direct labor hours. 
B) 168000 direct labor hours. 
C) 348000 direct labor hours. 
D) Cannot be determined from the information provided. 
A) 528000 direct labor hours. 
B) 168000 direct labor hours. 
C) 348000 direct labor hours. 
D) Cannot be determined from the information provided.

Question 16

Which of the following is not an indirect fixed cost?

Accepted Answer

A) Company president's salary 
B) Depreciation on the company building housing several profit centers 
C) Company personnel department costs 
D) Profit center supervisory salaries 
A) Company president's salary 
B) Depreciation on the company building housing several profit centers 
C) Company personnel department costs 
D) Profit center supervisory salaries

Question 17

A flexible budget depicted graphically

Accepted Answer

A) is identical to a CVP graph. 
B) differs from a CVP graph in the way that fixed costs are shown. 
C) differs from a CVP graph in the way that variable costs are shown. 
D) differs from a CVP graph in that sales revenue is not shown. 
A) is identical to a CVP graph. 
B) differs from a CVP graph in the way that fixed costs are shown. 
C) differs from a CVP graph in the way that variable costs are shown. 
D) differs from a CVP graph in that sales revenue is not shown.

Question 18

The terms controllable costs and noncontrollable costs are synonymous with variable costs and fixed costs respectively.

Accepted Answer

A) True 
 B)False

Question 19

Bogey Co.recorded operating data for its Cheap division for the year.Bogey requires its return to be 10%. $\begin{array} { l r } 
\text { Sales } & \$ 1,400,000 \
\text { Controllable margin } & 160,000 \
\text { Total average assets } & 4,000,000 \
\text { Fixed costs } & 100,000
\end{array}$ 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 20

Kevin Jarvis Industries produced 192000 units in 90000 direct labor hours.Production for the period was estimated at 198000 units and 99000 direct labor hours.A flexible budget would compare budgeted costs and actual costs respectively at

Accepted Answer

A) 96000 hours and 99000 hours. 
B) 99000 hours and 90000 hours. 
C) 96000 hours and 90000 hours. 
D) 90000 hours and 90000 hours. 
A) 96000 hours and 99000 hours. 
B) 99000 hours and 90000 hours. 
C) 96000 hours and 90000 hours. 
D) 90000 hours and 90000 hours.

A cost center incurs costs and generates revenues and cost center managers are evaluated on the profitability of their centers.

Top management can control

A flexible budget

Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.

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

A responsibility report for a profit center will

A static budget is most useful for evaluating a manager's performance in controlling variable costs.

A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost per unit × activity level).

The activity index used in preparing a flexible budget should not influence the variable costs that are being budgeted.

What is budgetary control?

In the performance report for cost centers

The activity index used in preparing the flexible budget

A department has budgeted monthly manufacturing overhead cost of $540000 plus $3 per direct labor hour.If a flexible budget report reflects $1044000 for total budgeted manufacturing cost for the month the actual level of activity achieved during the month was

Which of the following is not an indirect fixed cost?

A flexible budget depicted graphically

The terms controllable costs and noncontrollable costs are synonymous with variable costs and fixed costs respectively.

Bogey Co.recorded operating data for its Cheap division for the year.Bogey requires its return to be 10%. Sales \ 1,400,000 Controllable margin 160,000 Total average assets 4,000,000 Fixed costs 100,000 What is the ROI for the year?

Kevin Jarvis Industries produced 192000 units in 90000 direct labor hours.Production for the period was estimated at 198000 units and 99000 direct labor hours.A flexible budget would compare budgeted costs and actual costs respectively at

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Fraud, Internal Control, and Cash

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities and Stockholders Equity

Financial Analysis: the Big Picture

Managerial Accounting

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Activity Based Costing

Cost-Volume Profit Analysis: Additional Issues

Filters

Exam 15: Planning for Capital Investments

A cost center incurs costs and generates revenues and cost center managers are evaluated on the profitability of their centers.

Top management can control

A flexible budget

Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.

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

A responsibility report for a profit center will

A static budget is most useful for evaluating a manager's performance in controlling variable costs.

A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost per unit × activity level).

The activity index used in preparing a flexible budget should not influence the variable costs that are being budgeted.

What is budgetary control?

In the performance report for cost centers

The activity index used in preparing the flexible budget

A department has budgeted monthly manufacturing overhead cost of $540000 plus $3 per direct labor hour.If a flexible budget report reflects $1044000 for total budgeted manufacturing cost for the month the actual level of activity achieved during the month was

Which of the following is not an indirect fixed cost?

A flexible budget depicted graphically

The terms controllable costs and noncontrollable costs are synonymous with variable costs and fixed costs respectively.

Bogey Co.recorded operating data for its Cheap division for the year.Bogey requires its return to be 10%. Sales \ 1,400,000 Controllable margin 160,000 Total average assets 4,000,000 Fixed costs 100,000 What is the ROI for the year?

Kevin Jarvis Industries produced 192000 units in 90000 direct labor hours.Production for the period was estimated at 198000 units and 99000 direct labor hours.A flexible budget would compare budgeted costs and actual costs respectively at

Introduction to Financial Statements

A Further Look at Financial Statements

The Accounting Information System

Accrual Accounting Concepts

Fraud, Internal Control, and Cash

Reporting and Analyzing Long-Lived Assets

Reporting and Analyzing Liabilities and Stockholders Equity

Financial Analysis: the Big Picture

Managerial Accounting

Cost-Volume-Profit

Incremental Analysis

Budgetary Planning

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Activity Based Costing

Cost-Volume Profit Analysis: Additional Issues

Filters