Acc 556 week 7 chapter 22

ACC 556 WEEK 7 CHAPTER 22

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Question 1
Nikoto Steel Co. budgeted manufacturing costs for 50,000 tons of steel are:

Fixed manufacturing costs $50,000 per month
Variable manufacturing costs $12.00 per ton of steel

Nikoto produced 40,000 tons of steel during March. How much is the flexible budget for total manufacturing costs for March?

$520,000

$650,000

$480,000

$530,000
Question 2
If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on

the original planned level of activity.

54,000 units of activity.

60,000 units of activity.

48,000 units of activity.
Question 3
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?

4%

35%

6%

1.5%

1 points
Question 4
What is the primary difference between a static budget and a flexible budget?

The static budget contains only fixed costs, while the flexible budget contains only variable costs.

The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels.

The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management.

The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold.
Question 5
Budget reports provide the feedback needed by management to see whether actual operations are on course.
True
False
Question 6
Match the items below by entering the appropriate code letter in the space provided.

The use of budgets to control operations.

A projection of budget data at one level of activity.

A projection of budget data for various levels of activity.

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.

Costs that a manager has the authority to incur within a given period of time.

The review of budget reports by top management directed entirely or primarily to differences between actual results and planned objectives.

The preparation of reports for each level of responsibility shown in the company’s organization chart.

A measure of the profitability of an investment center computed by dividing controllable margin (in dollars) by average operating assets.

A responsibility center that incurs costs and also generates revenues.

A responsibility center that incurs costs, generates revenues, and has control over the investment funds available for use.

Costs which are incurred for the benefit of more than one profit center.

Costs that relate specifically to a responsibility center and are incurred for the sole benefit of the center.
A. Static budget
B. Investment center
C. Responsibility reporting system
D. Indirect fixed costs
E. Flexible budget
F. Responsibility accounting
G. Controllable costs
H. Budgetary control
I. Profit center
J. Return on Investment
K. Management by exception
L. Direct fixed costs

Question 7
What is the goal of residual income?

To maximize the amount of costs which are controllable

To maximize profits

To maximize the total amount of residual income

To maximize controllable margin
Question 8
At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials:

$1,400 unfavorable.

$1,400 favorable.

$600 favorable.

$600 unfavorable.
Question 9
A measure frequently used to evaluate the performance of the manager of an investment center is

the amount of profit generated.

the rate of return on funds invested in the center.

the percentage increase in profit over the previous year.

departmental gross profit.
Question 10
What is budgetary control?

Another name for a flexible budget

The degree to which the CFO controls the budget

The use of budgets in controlling operations

The process of providing information on budget differences to lower level managers
Question 11
The manager of an investment center can improve ROI by reducing average operating assets.
True
False
Question 12
Given below is an excerpt from a management performance report:

Budget Actual Difference

Contribution margin $600,000 $580,000 $20,000 U
Controllable fixed costs $200,000 $220,000 $20,000 U

The manager’s overall performance

is 10% above expectations.

is 10% below expectations.

is equal to expectations.

cannot be determined from the information provided.
Question 13
Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.
True
False

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