CHAPTER 23. Budgetary Control and Responsibility Accounting Flashcards
Budgetary control involves all but one of the following:
a. modifying future plans.
b. analyzing differences.
c. using static budgets but not flexible budgets.
d. determining differences between actual and planned results.
c. using static budgets but not flexible budgets.
Depending on the nature of the report, budget reports are prepared:
a. daily.
b. weekly.
c. monthly.
d. All of the above.
d. All of the above.
A production manager in a manufacturing company would most likely receive a:
a. sales report.
b. income statement.
c. scrap report.
d. shipping department overhead report.
c. scrap report.
A static budget is:
a. a projection of budget data at several levels of activity within the relevant range of activity.
b. a projection of budget data at a single level of activity.
c. compared to a flexible budget in a budget report.
d. never appropriate in evaluating a manager’s effectiveness in controlling costs.
b. a projection of budget data at a single level of activity.
A static budget is useful in controlling costs when cost behavior is:
a. mixed.
b. fixed.
c. variable.
d. linear.
b. fixed.
At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects the vertical axis at $30,000. At 10,000 direct labor hours, a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $90,000. Fixed and variable costs may be expressed as:
a. $30,000 fixed plus $6 per direct labor hour variable.
b. $30,000 fixed plus $9 per direct labor hour variable.
c. $60,000 fixed plus $3 per direct labor hour variable.
d. $60,000 fixed plus $6 per direct labor hour variable.
a. $30,000 fixed plus $6 per direct labor hour variable.
(Fixed costs are $30,000 (amount at zero direct labor hours), so budgeted variable costs are $60,000 [$90,000 (Total costs) − $30,000 (Fixed costs)]. Budgeted variable costs ($60,000) divided by total activity level (10,000 direct labor hours) gives the variable cost per unit of $6 per direct labor hour.)
At 9,000 direct labor hours, the flexible budget for indirect materials (a variable cost) is $27,000. If $28,000 of indirect materials costs are incurred at 9,200 direct labor hours, the flexible budget report should show the following difference for indirect materials:
a. $1,000 unfavorable.
b. $1,000 favorable.
c. $400 favorable.
d. $400 unfavorable.
d. $400 unfavorable.
(27,000 ÷ 9,000 x 9,200) – 28,000
Under responsibility accounting, the evaluation of a manager’s performance is based on matters that the manager:
a. directly controls.
b. directly and indirectly controls.
c. indirectly controls.
d. has shared responsibility for with another manager.
a. directly controls.
Responsibility centers include:
a. cost centers.
b. profit centers.
c. investment centers.
d. All of the above.
d. All of the above.
Responsibility reports for cost centers:
a. distinguish between fixed and variable costs.
b. use static budget data.
c. include both controllable and noncontrollable costs.
d. include only controllable costs.
d. include only controllable costs.
The accounting department of a manufacturing company is an example of:
a. a cost center.
b. a profit center.
c. an investment center.
d. a contribution center.
a. a cost center.
To evaluate the performance of a profit center manager, upper management needs detailed information about:
a. controllable costs.
b. controllable revenues.
c. controllable costs and revenues.
d. controllable costs and revenues and average operating assets.
c. controllable costs and revenues.
In a responsibility report for a profit center, controllable fixed costs are deducted from contribution margin to show:
a. profit center margin.
b. controllable margin.
c. net income.
d. income from operations.
b. controllable margin.
In the formula for return on investment (ROI), the factors for controllable margin and operating assets are, respectively:
a. controllable margin percentage and total operating assets.
b. controllable margin dollars and average operating assets.
c. controllable margin dollars and total assets.
d. controllable margin percentage and average operating assets.
b. controllable margin dollars and average operating assets.
A manager of an investment center can improve ROI by:
a. increasing average operating assets.
b. reducing sales.
c. increasing variable costs.
d. reducing variable and/or controllable fixed costs.
d. reducing variable and/or controllable fixed costs.
