Exam4

Question 1

SHOWS EXPECTED RESULTS OF A RESPONSIBILITY CENTER FOR ONLY ONE ACTIVITY LEVEL

Answer 1

STATIC BUDGET

Question 2

SHOWS THE EXPECTED RESULTS OF A RESPONSIBILITY CENTER FOR SEVERAL ACTIVITY LEVELS

Answer 2

FLEXIBLE BUDGET

Question 3

FIRST BUDGET CUSTOMARILY PREPARED AS PART OF AN ENTITY’S MASTER BUDGET

Answer 3

SALES BUDGET

Question 4

ESTIMATES THE NUMBER OF UNITS TO BE MANUFACTURED TO MEET BUDGETED SALES AND DESIRED INVENTORY

Answer 4

PRODUCTION BUDGET

Question 5

ESTIMATES THE EXPECTED RECEIPTS AND PAYMENTS OF CASH FOR A PERIOD OF TIME

Answer 5

CASH BUDGET

Question 6

RESPONSIBILITY: making decisions that affect ___________ in a “cost center”

Answer 6

Costs

Question 7

RESPONSIBILITY: making decisions that affect ___________ in a “profit center”

Answer 7

responsible for generating its revenues and earnings; bottom line

Question 8

If a static budget shows 10,000 Units of production with a cost for direct materials is $60,000 and a flexible budget shows 12,000 units of production, what is the flexible budget for direct materials?

Answer 8

$72,000
$60,000 ÷ 10,000 = $6 per unit cost
$6 × 12,000 = $72,000
Does not effect fixed costs. Would effect Direct Labor but not fixed cost Salaries.

Question 9

In a Production Budget, if the number of units expected to be sold during the year is 8,000, the number of units desired in the ending inventory is 470 units, and the number of units in the beginning inventory is 510 units, the total production for the year is:

Answer 9

$7,960
(8,000 + 470) - 510 = 7,960

Question 10

Decentralized operation advantages:

Answer 10

Top management feed from everyday tasks to do strategic planning.
Each unit is responsible for its own operations and decision making
Managers make better decisions when closer to the operations of the company
Expertise in all areas of the business is difficult; makes it better to delegate certain responsibilities
Managers can respond quickly to customer needs.

Question 11

Disadvantages of Decentralized Operations

Answer 11

Competition among managers
Duplication of operations
Price cutting by departments that are Competition in the same product market
Each decentralized operation purchases is own assets and pays for operating costs.
Decisions made by one manager may negatively affect the profitability of the entire company

Question 12

_______________ operations are businesses that are sprayed into two or more manageable units in which managers have authority and responsibility for operations.

Answer 12

Decentralized

Question 13

RATE OF RETURN

Answer 13

A simple rate of return is calculated bysubtracting the initial value of the investment from its current value, and then dividing it by the initial value.

Question 14

INVESTMENT TURNOVER

Answer 14

The ratio of sales to invested assets

divide net sales or revenue by the average total assets.

Question 15

The PROFIT MARGIN is the ratio of

Answer 15

Income from operations to sales

Question 16

RETURN ON INVESTMENT EQUATION

Answer 16

Operating Income ÷ Invested Assets

Question 17

NET PRESENT VALUE & THE INTERNAL RATE OF RETURN are methods that

Answer 17

Consider the time value of money concept to analyze capital investment proposals.

Question 18

OPERATING LEVERAGE

Answer 18

Operating Leverage = % Δ in Operating Income / % Δ in Revenue

Contribution Margin (%) = (Revenue – Variable Costs) ÷ Revenue.

Operating Margin (%) = (Revenue – Variable Costs – Fixed Costs) ÷ Revenue.

Question 19

BREAK EVEN POINT & MARGIN OF SAFETY

Answer 19

To calculate the BEP, you can use the following formula:
Break-Even Point = Fixed Costs / (Sales Price Per Unit – Variable Costs Per Unit)
150,000 / (250 – 100) = 1,000.
Margin of Safety = Budgeted Sales – Break-Even Sales.