Question 1

Joseph Company reported the following information for the current year:  The company's operating income was:

Accepted Answer

A)   $94,440.
B)   $56,250.
C)   $45,000.
D)   $33,750.E) B) and C)
F) A) and C)

Question 2

Which of the following income statement formats is most commonly used with flexible budgeting?

Accepted Answer

A)   Sales − Variable costs = Contribution margin; Contribution margin − Fixed costs = Net income
B)   Sales − Cost of goods sold = Gross margin; Gross margin − Operating expenses = Net income
C)   Sales − Manufacturing costs − Selling and administrative costs = Net income
D)   None of these answers is correct.E) A) and C)
F) C) and D)

Question 3

Select the incorrect statement concerning the application of the controllability concept to responsibility accounting.

Accepted Answer

A)   As a practical matter, control of costs or revenues may be shared rather than absolute.
B)   The concept of control is crucial to an effective responsibility accounting system.
C)   Managers lose motivation when they are held accountable for actions that are beyond their scope of control.
D)   Each manager should be evaluated on the costs but not the revenues that are under his or her control.E) B) and D)
F) B) and C)

Question 4

Campbell Candy Corporation desires a 16% return on investment (ROI)  on all operations. The following information was available for the company for the current year:  What is the corporation's ROI? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Accepted Answer

A)   16.80%
B)   28.00%
C)   32.00%
D)   Impossible to determine from the information given.E) A) and B)
F) A) and C)

Question 5

Jared expects to charge $60 per hour for his industrial maintenance business during the following year. He expects to reach 50,000 hours at that price. Jared's partner disagrees with the estimate and expects closer to 40,000 hours. What should Jared do when preparing the budget for the year?

Accepted Answer

A)   Create a flexible budget showing a range of outcomes between 40,000 hours and 50,000 hours.
B)   Create two master budgets, one at 50,000 hours and one at 40,000 hours.
C)   Create only one budget at the more optimistic volume of 50,000 hours.
D)   Create a volume budget based on actual performance.E) A) and C)
F) A) and D)

Question 6

Which of the following applications is most suited for developing flexible budgets?

Accepted Answer

A)   Database
B)   Graphics
C)   Spreadsheet
D)   Word processingE) None of the above
F) All of the above

Question 7

Which of the following is a characteristic that is needed for decentralization to work well in an organization?

Accepted Answer

A)   Clear lines of authority
B)   Responsibility
C)   Good communication
D)   All of these are correct answers.E) None of the above
F) A) and D)

Question 8

Packrall Company makes computer chips. Curtis is manager of the company's maintenance department. Because his maintenance technicians are so well trained in maintaining expensive and sensitive circuit board stamping equipment, Curtis has been authorized to contract to perform maintenance for outside customers. In this company, the maintenance department is likely organized as:

Accepted Answer

A)   A profit center.
B)   A revenue center.
C)   A cost center.
D)   An investment center.E) B) and D)
F) A) and D)

Question 9

White Company budgeted fixed overhead costs of $200,000 and volume of 40,000 units. During the year, the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The spending variance relating to the fixed overhead cost is:

Accepted Answer

A)   $10,000 favorable.
B)   $10,000 unfavorable.
C)   $5,000 favorable.
D)   $5,000 unfavorable.E) A) and D)
F) A) and B)

Question 10

Payne Company reported the following information for the current year:  The company's residual income was:

Accepted Answer

A)   $(15,000) .
B)   $14,000.
C)   $15,000.
D)   $24,000.E) C) and D)
F) B) and C)

Question 11

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12. The sales revenue flexible budget variance was:

Accepted Answer

A)   $6,120 favorable.
B)   $6,000 unfavorable.
C)   $17,880 favorable.
D)   $17,880 unfavorable.E) None of the above
F) A) and D)

Question 12

A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:

Accepted Answer

A)   Flexible budget variance.
B)   Static budget variance.
C)   Production activity variance.
D)   Volume variance.E) A) and B)
F) C) and D)

Question 13

In the current year, the New Products Division of Testar Company had operating income of $8,000,000 and operating assets of $44,800,000. Testar has set a target return on investment (ROI)  of 16% for each of its divisions. Which of the following statements is correct?

Accepted Answer

A)   The New Products division yielded ROI that was lower than the target ROI.
B)   Residual income for the New Products division was $832,000.
C)   The New Products division yielded no residual income.
D)   All of these are correct.E) A) and C)
F) B) and D)

Question 14

For performance evaluation, the amount of costs actually incurred should be compared to the costs that would have been incurred at the actual volume of activity rather than at the planned volume of activity.

Accepted Answer

A) True 
 B)False

Question 15

Investment centers are often evaluated on the basis of return on investment.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements regarding cost centers is incorrect?

Accepted Answer

A)   Cost centers are units within a business that incur expense, but do not have responsibility for generating revenue.
B)   Cost centers tend to be found at upper levels on a company's organization chart.
C)   A manager of a cost center has less responsibility than a manager in an investment center.
D)   Cost center managers are evaluated on their ability to control costs and keep within budget.E) A) and B)
F) All of the above

Question 17

Which of the following would increase residual income? (Assume all other things are equal)

Accepted Answer

A)   Decrease in investment
B)   Decrease in operating income
C)   Increase in the desired return on investment
D)   None of these.E) A) and B)
F) B) and D)

Question 18

Huang Company reported the following information for the current year:  The company's return on investment was: (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Accepted Answer

A)   10.00%.
B)   6.25%.
C)   16.00%.
D)   Cannot be ascertained from the information provided.E) None of the above
F) All of the above

Question 19

When would a cost variance be listed as unfavorable?

Accepted Answer

A)   When actual costs are less than budgeted costs
B)   When actual costs exceed budgeted costs
C)   When actual costs are equal to budgeted costs
D)   When actual sales are less than budgeted salesE) A) and D)
F) A) and C)

Question 20

The differences between the standard and actual amounts are called variances.

Accepted Answer

A) True 
 B)False

Exam 15: Performance Evaluation

Huang Company reported the following information for the current year: The company's return on investment was: (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Correct Answer
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Jared expects to charge $60 per hour for his industrial maintenance business during the following year. He expects to reach 50,000 hours at that price. Jared's partner disagrees with the estimate and expects closer to 40,000 hours. What should Jared do when preparing the budget for the year?

Correct Answer
verified

In the current year, the New Products Division of Testar Company had operating income of $8,000,000 and operating assets of $44,800,000. Testar has set a target return on investment (ROI) of 16% for each of its divisions. Which of the following statements is correct?

Correct Answer
verified

The differences between the standard and actual amounts are called variances.

Correct Answer
verified

Which of the following applications is most suited for developing flexible budgets?

Correct Answer
verified

Select the incorrect statement concerning the application of the controllability concept to responsibility accounting.

Correct Answer
verified

When would a cost variance be listed as unfavorable?

Correct Answer
verified

Which of the following income statement formats is most commonly used with flexible budgeting?

Correct Answer
verified

Which of the following statements regarding cost centers is incorrect?

Correct Answer
verified

Joseph Company reported the following information for the current year: The company's operating income was:

Correct Answer
verified

White Company budgeted fixed overhead costs of $200,000 and volume of 40,000 units. During the year, the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The spending variance relating to the fixed overhead cost is:

Correct Answer
verified

Investment centers are often evaluated on the basis of return on investment.

Correct Answer
verified

A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:

Correct Answer
verified

Which of the following is a characteristic that is needed for decentralization to work well in an organization?

Correct Answer
verified

Which of the following would increase residual income? (Assume all other things are equal)

Correct Answer
verified

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12. The sales revenue flexible budget variance was:

Correct Answer
verified

Correct Answer
verified

Campbell Candy Corporation desires a 16% return on investment (ROI) on all operations. The following information was available for the company for the current year: What is the corporation's ROI? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Correct Answer
verified

For performance evaluation, the amount of costs actually incurred should be compared to the costs that would have been incurred at the actual volume of activity rather than at the planned volume of activity.

Correct Answer
verified

Payne Company reported the following information for the current year: The company's residual income was:

Correct Answer
verified

Exam 15: Performance Evaluation

Huang Company reported the following information for the current year: The company's return on investment was: (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Correct AnswerverifiedShow Answer

Jared expects to charge $60 per hour for his industrial maintenance business during the following year. He expects to reach 50,000 hours at that price. Jared's partner disagrees with the estimate and expects closer to 40,000 hours. What should Jared do when preparing the budget for the year?

Correct AnswerverifiedShow Answer

In the current year, the New Products Division of Testar Company had operating income of $8,000,000 and operating assets of $44,800,000. Testar has set a target return on investment (ROI) of 16% for each of its divisions. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The differences between the standard and actual amounts are called variances.

Correct AnswerverifiedShow Answer

Which of the following applications is most suited for developing flexible budgets?

Correct AnswerverifiedShow Answer

Select the incorrect statement concerning the application of the controllability concept to responsibility accounting.

Correct AnswerverifiedShow Answer

When would a cost variance be listed as unfavorable?

Correct AnswerverifiedShow Answer

Which of the following income statement formats is most commonly used with flexible budgeting?

Correct AnswerverifiedShow Answer

Which of the following statements regarding cost centers is incorrect?

Correct AnswerverifiedShow Answer

Joseph Company reported the following information for the current year: The company's operating income was:

Correct AnswerverifiedShow Answer

White Company budgeted fixed overhead costs of $200,000 and volume of 40,000 units. During the year, the company produced and sold 39,000 units and spent $210,000 on fixed overhead. The spending variance relating to the fixed overhead cost is:

Correct AnswerverifiedShow Answer

Investment centers are often evaluated on the basis of return on investment.

Correct AnswerverifiedShow Answer

A difference between the static budget based on planned volume and a flexible budget prepared at actual volume is called a:

Correct AnswerverifiedShow Answer

Which of the following is a characteristic that is needed for decentralization to work well in an organization?

Correct AnswerverifiedShow Answer

Which of the following would increase residual income? (Assume all other things are equal)

Correct AnswerverifiedShow Answer

The Boyle Company estimated that April sales would be 150,000 units with an average selling price of $6.00. Actual sales for April were 149,000 units and average selling price was $6.12. The sales revenue flexible budget variance was:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Campbell Candy Corporation desires a 16% return on investment (ROI) on all operations. The following information was available for the company for the current year: What is the corporation's ROI? (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

Correct AnswerverifiedShow Answer

For performance evaluation, the amount of costs actually incurred should be compared to the costs that would have been incurred at the actual volume of activity rather than at the planned volume of activity.

Correct AnswerverifiedShow Answer

Payne Company reported the following information for the current year: The company's residual income was:

Correct AnswerverifiedShow Answer

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