Exam 11: Flexible Budgets, Segment Analysis, and Performance Reporting

Conner Manufacturing has two major divisions. Management wants to compare their relative performance. Information related to the two divisions is as follows: Division 1: Division 2: Based on ROI, which division is more profitable?

Who should be held responsible for department costs?

Why is it not reasonable to create a segment contribution margin income statement for a cost center?

Increased productivity of workers might not be reflected on the static budget variance if there were also:

For two segments with the same level of sales, why would one have a higher Return on Sales?

What metric might a manager use to measure the performance of a company in the area of customer satisfaction?

Why is the cost function for the flexible budget only applicable within the relevant range?

If actual revenues are lower than budgeted, how would the flexible budget report help a manager know whether to focus on increasing prices or increasing sales volumes?

Which of the following are reasons to involve lower management in making business decisions?

Comparing static budgeted costs to actual costs can be misleading to management.

If management underestimates sales and production levels, will overall cost variances likely be favorable or unfavorable?

The following information is available for Simon & Simon Corporation for this last year: What is the Direct Labor Flexible Budget Variance?

Which of the following is needed in order to prepare the flexible budget?

Which of the following is NOT important to know when preparing the flexible budget?

Which of the following managers would be most concerned about a segment's ROA?

Sanchez & Sons is a Mexican baked-goods manufacturing firm. Sanchez has two main divisions: Packaged Mixes and Finished Products. The Finished Products division is considering purchasing the mix for its churros from an outside supplier. The Packaged Mixes department incurs the following costs for each batch of churros mix: Direct Materials: $300 Direct Labor: $200 Variable Overhead: $200 Fixed Overhead: $150 In addition to the cost of the churros mix, the Finished Products Department would incur the following costs for each batch of churros: Direct Materials: $150 Direct Labor: $140 Variable Overhead: $300 Fixed Overhead: $100 The current market price from an outside supplier for the quantity of mix needed by the Finished Products department is $800. The finished churros from each batch of mix will sell for $1,500. What is the range of transfer prices within which the two departments could agree on a price to maximize Sanchez & Sons' profit?

Bagley & Daughters is a baked-goods manufacturing firm. Bagley has two main divisions: Packaged Mixes and Finished Desserts. The Finished Desserts division is considering purchasing the mix for its cakes from an outside supplier. The Packaged Mixes department incurs the following costs for each batch of cake mix: In addition to the cost of the cake mix, the Finished Desserts Department would incur the following costs for each batch of cakes: The current market price from an outside supplier for the quantity of mix needed by the Finished Desserts department is $200. The finished cakes from each batch of mix will sell for $400. What is the range of transfer prices within which the two departments could agree on a price to maximize Bagley & Daughters' profit?

The Asset Turnover (Asset Utilization) ratio is equal to:

Use the following information to answer Problems below Walkeasy Co. produces shoes and memory foam insoles. The memory foam insoles were originally designed to be a component of the shoes (1 insole per shoe). However, the market for memory foam insoles was profitable enough that management has opted to sell some of the insoles on their own. Any insoles produced beyond what is necessary to meet the needs of shoes production are sold at market prices. Normally, the transfer cost of the insoles is equal to the market sale price. Because of a differentiation strategy, management at Walkeasy has decided that the Shoes department and the Insoles department should be measured and tracked separately. When insoles are transferred to the Shoes department, they are inventoried at market prices. The following information relates to the costs of production for the year for the two departments. Per the company policy, all inventories are kept at stable levels: in other words, sales and production are equal, and purchases of raw materials equal those requisitioned for production. -What is the flexible budget variance for the year for the whole company?

Use the following information to complete Problems below Komfort Mattress Co. produces foam-topped mattresses and foam mattress pads. The mattress pads were originally designed to be a component of the mattresses (1 pad per mattress). However, the market for mattress pads was profitable enough that management has opted to sell some of the pads on their own. Any pads produced beyond what is necessary to meet the needs of mattress production are sold at market prices. Normally, the transfer cost of the pads is equal to the market sale price. Because of the differentiation strategy, management at Komfort has decided that the Mattress department and the Pads department should be measured and tracked separately. When pads are transferred to the Mattress department, they are inventoried at market prices. The following information relates to the costs of production for the year for the two departments. Per the company policy, all inventories are kept at stable levels: in other words, sales and production are equal, and purchases of raw materials equal those requisitioned for production. -What is the flexible budget variance for the year for the whole company?