Exam 10: Management Control Systems

Glock, SA., is looking for feedback on performance. The company compares the budget for the year with the actual costs. Glock had the following budgeted data: Required: Prepare a flexible budget for production costs for the following range of activity: 2,500 units; 4,000 units; 6,000 units.

Flexible budgets do NOT provide

If budget performance is overemphasized, myopic behaviour can occur where a manager takes actions that improve budgetary performance in the short run but cause long-run harm to the firm. Required: a. Give at least two examples of myopic behaviour that might be encouraged if there is an overemphasis on budgets as a performance measure. b. Discuss ways to discourage or prevent myopic behaviour in managers.

Goal congruence means

A manager of a profit centre:

Harald, SA., has done a cost analysis for its production of bumper stickers. The following activities and cost drivers have been developed: Following are the actual costs of producing 85,000 stickers: 5,000 machine hours; 10 batches; 20 purchase orders What is the budget variance for total costs in an activity-based performance report?

Villafane, SA., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30 purchase orders The following variances were given in the activity performance report: What is the activity variance for design?

One of the ways that functional-based accounting systems may inadvertently induce managers to act against the company's best interest is to

Why should motivational considerations be a part of budget planning and utilization? List several ways to motivate employees with budgets.

Which of the following facets of a responsibility accounting system is most likely to lead employees to distrust the entire budgeting and performance evaluation system?

_____ exists when managers deliberately underestimate revenues or overestimate costs to provide flexibility

What results could be expected by placing pressure on management to perform at certain levels?

If the static budget variance for materials is £200 F and the budgeted cost for materials is £52,000, then the actual cost of materials is

When top management assumes total control of the budgeting process and seeks only superficial participation from lower-level managers, this practice is called

The static budget variance for materials is £200 F and the budgeted cost for materials is £52,000. If the budgeted volume is 13,000 and the actual volume is 13,500, then the flexible budget variance is

Timothy, SA., uses a flexible budget for overhead costs. The company expects to produce 40,000 units of the product it manufactures. Each unit requires 0.40 direct labour hours. The cost formulas for each of the four overhead items (where X is measured in direct labour hours) is as follows: Required: a. Prepare an overhead budget for the expected activity level for the coming year. b. Prepare an overhead budget that reflects production that is 25 percent lower than expected.

Before implementing a responsibility accounting system, all areas of authority and responsibility within an organization must be clearly defined. Explain how this accomplished and why it is important.

Armati, SA., is looking for feedback on company performance. The company compares the budget for the year with the actual costs. Data have been collected below: Armati, SA., had the following budgeted data: The following actually occurred: The static budget variance for total fixed overhead is

Which of the following departments would NOT be classified as a profit centre?

Classics, SA., uses a flexible budget for overhead costs. The company expects to produce 20,000 units of the product it manufactures. Half of the units require 0.50 direct labour hours per unit. The remainder requires 0.75 direct labour hours per unit. The cost formulas for each of the four overhead items is as follows: Required: a. Prepare an overhead budget for the expected activity level for the coming year. b. Prepare an overhead budget that reflects production that is 10 percent higher than expected.