Exam 15: Performance Evaluation

Assuming actual volume is 10,000 units and planned volume is 12,000 units, the sales volume variance in units:

Select the correct statement regarding flexible budgets.

The research and development department of Apple Computers would likely be organized as:

Huang Company reported the following information for the current year: Sales \ 870,000 Average operating assets \ 570,000 Margin 10\% The company's return on investment was: (Do not round intermediate calculations. Round your final answer to 2 decimal places.)

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?

Jones Company developed the following static budget at the beginning of the company's accounting period: Revenue ( 8,000 units) \ 16,000 Variable costs Contribution margin \ 12,00 Fixed costs Net income If actual production totals 8,200 units, the flexible budget would show total costs of:

To avoid suboptimization, many companies prefer to evaluate their investment centers using:

Jacob is a department manager who recently instituted a new recognition program for his employees. He budgeted the cost of the new program at $10 per employee, but actual costs were $15 per employee. The cost associated with the recognition program would be considered which of the following kinds of cost?

The New Products Division of Testar Company, had operating income of $8,000,000 and operating assets of $44,800,000 during the current year. The New Products Division has developed a potential new product that would require $8,500,000 in operating assets and would be expected to provide $1,400,000 in operating income each year. Testar has set a target return on investment (ROI) of 16% for each of its divisions. Assuming that the new product is put into production, calculate the division's ROI.

The New Products Division of Testar Company, had operating income of $9,000,000 and operating assets of $45,800,000 during the current year. The New Products Division has developed a potential new product that would require $9,500,000 in operating assets and would be expected to provide $2,400,000 in operating income each year. Testar has set a target return on investment (ROI) of 19% for each of its divisions. Assuming that the new product is put into production, calculate the division's ROI.

Indicate whether each of the following statements is true or false.Managerial performance can be evaluated by comparing actual amounts with standard amounts.Differences between standard and actual amounts are called variances.When the static budget is compared to a flexible budget based on actual volume of activity, any variances result from differences between standard and actual per unit amounts.If the actual sales price per unit is higher than the standard, a company's sales price variance is unfavorable.Differences between flexible budget costs and revenues and the actual results are price variances.

Volume variances are computed for which of the following costs?

When would a variance be labeled as unfavorable?

The Electronics Division of Anton Company reports the following results for the current year: Revenues \ 800,000 Operating expenses \ 656,000 Operating income \ 144,000 Operating assets \ 1,200,000 Anton Company has set a target return on investment (ROI) of 11% for the Electronics Division. The Electronic Division's margin is:

Monroe Corporation budgeted fixed costs of $250,000 for the current year. The company expected to make 20,000 units during the year. Actual fixed costs were $256,000, and Monroe actually made 22,000 units of product.Required:Calculate the spending variance relating to these fixed costs and indicate whether it is favorable or unfavorable.Calculate the fixed cost volume variance and indicate whether it is favorable or unfavorable. Explain why the variance is favorable or unfavorable.

Baker charges its customers $60 per hour. The chief operating officer expected that the company would provide 40,000 hours of service to clients. However, the vice president for marketing argues that the actual number of hours may range from 36,000 to 44,000 hours. Baker's standard variable cost is $32.50 per hour, and its standard fixed cost is $750,000.Required:Prepare flexible budgets for 36,000, 40,000, and 44,000 hours.

Describe how a flexible budget is useful in planning for an organization.

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

The term that describes what occurs when a manager does what is in his/her best interests and not what is in the best interests of the company as a whole is known as:

Indicate whether each of the following statements is true or false.A flexible budget can be viewed as an extension of a company's master budget.The master budget is a static budget because it is prepared for a single level of volume.Standards are established for a company's costs but not for the selling prices of its goods and services.If rent is budgeted at $34,000 for 10,000 units, rent would also be budgeted at $34,000 for 11,000 units.Flexible and static budgets use the same per-unit standard amounts for sales and variable costs.