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Exam 23: Budgetary Control and Responsibility Accounting

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Question 61

Multiple Choice

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

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

E) None of the above
F) A) and D)

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Question 62

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

A) True
B) False

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Question 63

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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.

Management by exception

Flexible budgets are widely used in production and service departments.

Certain budget reports are prepared monthly, whereas others are prepared more frequently depending on the activities being monitored.

Bogey Co. recorded operating data for its Cheap division for the year. Bogey requires its return to 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?

Campbell Clothing produces men's ties. The following budgeted and actual amounts are for 2016: Instructions Prepare a performance budget report for Campbell Clothing for the year.

Match the items below by entering the appropriate code letter in the space provided. A. Budgetary control B. Static budget C. Flexible budget D. Responsibility accounting E. Controllable costs F. Management by exception G. Responsibility reporting system H. Return on Investment I. Profit center J. Investment center K. Indirect fixed costs 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.

The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called

Boland Manufacturing prepared a 2016 budget for 120,000 units of product. Actual production in 2016 was 130,000 units. To be most useful, what amounts should a performance report for this company compare?

Naples, Inc. 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 $30,000, assuming fixed costs are held constant?

Strickland Corp.'s manufacturing overhead budget for the first quarter of 2016 contained the following data: Actual fixed costs were as expected except for property taxes which were $9,000. All costs are considered controllable by the department manager except for the supervisor's salary. Instructions Prepare a manufacturing overhead responsibility performance report for the first quarter.

Le Sud Retailers 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?

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

Top management's reaction to a difference between budgeted and actual sales often depends on

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

Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets?

Kevin Jarvis Industries produced 192,000 units in 90,000 direct labor hours. Production for the period was estimated at 198,000 units and 99,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at

A flexible budget is a series of static budgets at different levels of activities.