Question 1

What is the purpose of determining return on investment?

Accepted Answer

A) to assess a company's controllable margin 
B) to determine which costs are controllable 
C) to assess performance of an investment centre 
D) to determine profitability of a profit centre 
A) to assess a company's controllable margin 
B) to determine which costs are controllable 
C) to assess performance of an investment centre 
D) to determine profitability of a profit centre

Question 2

EKPN Company recorded the following operating data: $$\begin{array} { l l } 
\text { Sales } & \$ 1,250,000 \
\text { Contribution margin } & 485,000 \
\text { Total direct fixed costs } & 400,300 \
\text { Total operating assets Jan. 1, 2020 } & 750,000 \
\text { Total operating assets Dec. 31, 2020 } & 790,000 \
\text { EKPN Compary's desired return } & 12 \%
\end{array}$$ What is EKPN Company's controllable margin?

Accepted Answer

A) $849,700 
B) $765,000 
C) $410,000 
D) $84,700 
A) $849,700 
B) $765,000 
C) $410,000 
D) $84,700

Question 3

For what purpose is controllable margin most useful?

Accepted Answer

A) preparing the master budget 
B) performance evaluation of profit centres 
C) break-even analysis 
D) evaluating cost centres 
A) preparing the master budget 
B) performance evaluation of profit centres 
C) break-even analysis 
D) evaluating cost centres

Question 4

Management by exception means that management will investigate all areas where actual results are greater than planned results.

Accepted Answer

A) True 
 B)False

Question 5

Which one of the statements about a responsibility report is correct?

Accepted Answer

A) It contains controllable and non-controllable costs. 
B) It compares actual costs with static budget data. 
C) A distinction is made between variable and fixed costs. 
D) It is used to evaluate investment centres, but not cost or profit centres. 
A) It contains controllable and non-controllable costs. 
B) It compares actual costs with static budget data. 
C) A distinction is made between variable and fixed costs. 
D) It is used to evaluate investment centres, but not cost or profit centres.

Question 6

Which type of centre is the toy department in a Wal-Mart store?

Accepted Answer

A) an exception centre 
B) a profit centre 
C) a cost centre 
D) an investment centre 
A) an exception centre 
B) a profit centre 
C) a cost centre 
D) an investment centre

Question 7

In what situations will a static budget be most effective in evaluating a manager's effectiveness?

Accepted Answer

A) The company has substantial fixed costs. 
B) The company has substantial variable costs. 
C) The planned activity levels match actual activity levels. 
D) The company has no fixed costs. 
A) The company has substantial fixed costs. 
B) The company has substantial variable costs. 
C) The planned activity levels match actual activity levels. 
D) The company has no fixed costs.

Question 8

Of the following choices, which one is a common fixed cost?

Accepted Answer

A) profit centre manager's salary 
B) sales clerks' salaries 
C) costs from a central payroll department to create paycheques for a cost centre's employees 
D) depreciation on a responsibility centre's equipment 
A) profit centre manager's salary 
B) sales clerks' salaries 
C) costs from a central payroll department to create paycheques for a cost centre's employees 
D) depreciation on a responsibility centre's equipment

Question 9

How do controllable margin and contribution margin differ?

Accepted Answer

A) The amount of the controllable margin is larger than contribution margin. 
B) The amount of the contribution margin is usually higher than the controllable margin. 
C) They are synonymous terms. 
D) Controllable margin is used for profit centres, while contribution margin is used for cost centres. 
A) The amount of the controllable margin is larger than contribution margin. 
B) The amount of the contribution margin is usually higher than the controllable margin. 
C) They are synonymous terms. 
D) Controllable margin is used for profit centres, while contribution margin is used for cost centres.

Question 10

For which of the budgets in the master budget can a company prepare a flexible budget?

Accepted Answer

A) only the sales budget 
B) only the income statement budget 
C) only the budgets that reflect operations 
D) all of the budgets 
A) only the sales budget 
B) only the income statement budget 
C) only the budgets that reflect operations 
D) all of the budgets

Question 11

How does a graph of a flexible budget compare to a CVP graph?

Accepted Answer

A) Fixed costs appear differently. 
B) Variable costs appear differently. 
C) Sales revenues are not shown on a flexible budget graph. 
D) The two are graphed identically. 
A) Fixed costs appear differently. 
B) Variable costs appear differently. 
C) Sales revenues are not shown on a flexible budget graph. 
D) The two are graphed identically.

Question 12

Which statement is true concerning direct fixed costs?

Accepted Answer

A) They also called traceable costs. 
B) Profit centre managers are not able to control them. 
C) The often apply to more than one centre. 
D) They are added to controllable margin on a responsibility report. 
A) They also called traceable costs. 
B) Profit centre managers are not able to control them. 
C) The often apply to more than one centre. 
D) They are added to controllable margin on a responsibility report.

Question 13

EKPN Company recorded the following operating data: $$\begin{array} { l l } 
\text { Sales } & \$ 1,250,000 \
\text { Contribution margin } & 485,000 \
\text { Total direct fixed costs } & 400,300 \
\text { Total operating assets Jan. 1, 2020 } & 750,000 \
\text { Total operating assets Dec. 31, 2020 } & 790,000 \
\text { EKPN Compary's desired return } & 12 \%
\end{array}$$ What is EKPN Company's ROI, rounded to the nearest whole number?

Accepted Answer

A) 11% 
B) 12% 
C) 53% 
D) 55% 
A) 11% 
B) 12% 
C) 53% 
D) 55%

Question 14

Which statement is true concerning a static budget report?

Accepted Answer

A) It considers performance at numerous activity levels. 
B) It is appropriate in evaluating a manager's effectiveness in controlling fixed costs. 
C) It should be used when the actual level of activity is materially different from the master budget activity level. 
D) It is most effective when evaluating a manager's effectiveness in controlling variable costs. 
A) It considers performance at numerous activity levels. 
B) It is appropriate in evaluating a manager's effectiveness in controlling fixed costs. 
C) It should be used when the actual level of activity is materially different from the master budget activity level. 
D) It is most effective when evaluating a manager's effectiveness in controlling variable costs.

Question 15

The area manager of the Steak House Restaurants is considering two possible expansion alternatives.The required investments, expected controllable margins, and the ROIs of each are as follows: $\begin{array}{llll}
 \underline{\text {Project}}&
 \underline{\text {Investment}}&
 \underline{\text {Controllable Margin}}& \underline{\text {ROI}}\
\text { Winnipeg } & \$ 300,000 & \$ 100,000 & 33.33 \% \
\text { Regina } & \$ 700,000 & \$ 200,000 & 28.57 \%
\end{array}$  The Steak House segment has currently $5,000,000 in invested capital and a controllable margin of $1,500,000.Which one of following projects will increase the Steak House division's ROI?

Accepted Answer

A) both the Winnipeg and Regina options 
B) only the Winnipeg option 
C) only the Regina option 
D) neither the Winnipeg nor the Regina options 
A) both the Winnipeg and Regina options 
B) only the Winnipeg option 
C) only the Regina option 
D) neither the Winnipeg nor the Regina options

Question 16

When is a cost considered to be controllable?

Accepted Answer

A) only when the manager has the power to incur the cost within a given time period 
B) only if the cost is less than the budget amount 
C) only when it is a variable cost 
D) only when the amount changes based on different activity levels 
A) only when the manager has the power to incur the cost within a given time period 
B) only if the cost is less than the budget amount 
C) only when it is a variable cost 
D) only when the amount changes based on different activity levels

Question 17

Which responsibility centres generate both revenues and costs?

Accepted Answer

A) investment and profit centres 
B) profit and cost centres 
C) cost and investment centres 
D) only profit centres 
A) investment and profit centres 
B) profit and cost centres 
C) cost and investment centres 
D) only profit centres

Question 18

Which of the following is true?

Accepted Answer

A) The evaluation of performance should be based on both uncontrollable and controllable costs. 
B) Fewer costs become controllable as one moves up to each higher level of managerial responsibility. 
C) Fewer costs are controllable as one moves down to each lower level of managerial responsibility. 
D) Since a profit centre is an independent entity, all fixed costs are controllable by its manager. 
A) The evaluation of performance should be based on both uncontrollable and controllable costs. 
B) Fewer costs become controllable as one moves up to each higher level of managerial responsibility. 
C) Fewer costs are controllable as one moves down to each lower level of managerial responsibility. 
D) Since a profit centre is an independent entity, all fixed costs are controllable by its manager.

Question 19

Haroot Company's master budget shows that the planned activity level for next year is expected to be 20,000 machine hours.At this level of activity, the following manufacturing overhead costs are expected: $$\begin{array} { l l } 
\text { Indirect labour } & \$ 45,000 \
\text { Factory supplies } & 4,000 \
\text { Indirect materials } & 2 1 , 0 0 0  \
\text { Depreciation on factory building } &\underline{ 15,000 }\
 \text { Total manufactuing overhead } &\underline{\$85,000}
\end{array}$$ Indirect labour, factory supplies, and indirect materials are variable costs.If the company operates at 21,000 machine hours, how much is allowed on a flexible budget for manufacturing overhead costs?

Accepted Answer

A) $89,250 
B) $73,500 
C) $88,500 
D) $85,000 
A) $89,250 
B) $73,500 
C) $88,500 
D) $85,000

Question 20

Merck Pharmaceuticals is evaluating its Vioxx division, an investment centre.The division has a $45,000 controllable margin and $300,000 of sales.How much will Merck's average operating assets be when its return on investment is 10%?

Accepted Answer

A) $450,000 
B) $495,000 
C) $300,000 
D) $255,000 
A) $450,000 
B) $495,000 
C) $300,000 
D) $255,000

What is the purpose of determining return on investment?

EKPN Company recorded the following operating data: Sales \ 1,250,000 Contribution margin 485,000 Total direct fixed costs 400,300 Total operating assets Jan. 1, 2020 750,000 Total operating assets Dec. 31, 2020 790,000 EKPN Compary's desired return 12\% What is EKPN Company's controllable margin?

For what purpose is controllable margin most useful?

Management by exception means that management will investigate all areas where actual results are greater than planned results.

Which one of the statements about a responsibility report is correct?

Which type of centre is the toy department in a Wal-Mart store?

In what situations will a static budget be most effective in evaluating a manager's effectiveness?

Of the following choices, which one is a common fixed cost?

How do controllable margin and contribution margin differ?

For which of the budgets in the master budget can a company prepare a flexible budget?

How does a graph of a flexible budget compare to a CVP graph?

Which statement is true concerning direct fixed costs?

Which statement is true concerning a static budget report?

When is a cost considered to be controllable?

Which responsibility centres generate both revenues and costs?

Which of the following is true?

Merck Pharmaceuticals is evaluating its Vioxx division, an investment centre.The division has a $45,000 controllable margin and $300,000 of sales.How much will Merck's average operating assets be when its return on investment is 10%?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Cost-Volume-Profit

Incremental Analysis

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters

Exam 11: Budgetary Control and Responsibility Accounting

What is the purpose of determining return on investment?

EKPN Company recorded the following operating data: Sales \ 1,250,000 Contribution margin 485,000 Total direct fixed costs 400,300 Total operating assets Jan. 1, 2020 750,000 Total operating assets Dec. 31, 2020 790,000 EKPN Compary's desired return 12\% What is EKPN Company's controllable margin?

For what purpose is controllable margin most useful?

Management by exception means that management will investigate all areas where actual results are greater than planned results.

Which one of the statements about a responsibility report is correct?

Which type of centre is the toy department in a Wal-Mart store?

In what situations will a static budget be most effective in evaluating a manager's effectiveness?

Of the following choices, which one is a common fixed cost?

How do controllable margin and contribution margin differ?

For which of the budgets in the master budget can a company prepare a flexible budget?

How does a graph of a flexible budget compare to a CVP graph?

Which statement is true concerning direct fixed costs?

Which statement is true concerning a static budget report?

When is a cost considered to be controllable?

Which responsibility centres generate both revenues and costs?

Which of the following is true?

Merck Pharmaceuticals is evaluating its Vioxx division, an investment centre.The division has a $45,000 controllable margin and $300,000 of sales.How much will Merck's average operating assets be when its return on investment is 10%?

Managerial Accounting

Managerial Cost Concepts and Cost Behaviour Analysis

Job Order Costing

Process Costing

Activity-Based-Costing

Cost-Volume-Profit

Incremental Analysis

Alternative Inventory Costing Methods: a Decision-Making Perspective

Pricing

Budgetary Planning

Standard Costs and Balanced Scorecard

Planning for Capital Investments

Filters