Deck 16: Management Control Systems

Question 1

Which of the following is not an essential element of responsibility accounting?

A)assigning responsibility
B)establishing performance measures
C)evaluating performance
D)ridiculing poor performers

Answer 1

D

Question 2

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The static budget variance for rent is

A)£100 F.
B)£100 U.
C)£-0-.
D)£50 U.

Answer 2

£-0-.

Question 3

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The flexible budget variance for total cost for 2011 is

A)£90 U.
B)£140 U.
C)£230 U.
D)£50 U.

Answer 3

£140 U.

Question 4

Flexible budgets do NOT provide

A)expected costs for a range of activity.
B)budgeted costs for the actual level of activity.
C)budgeted costs for a predetermined level of activity.
D)expected costs for the actual performance level.

Question 5

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The static budget for total variable costs is

A)£90 U.
B)£180 U.
C)£790 F.
D)£880 F.

Question 6

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The flexible budget for direct materials cost in 2011 is

A)£3,500.
B)£3,600.
C)£3,900.
D)£4,000.

Question 7

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The total flexible budgeted costs for 2011 are

A)£10,560.
B)£13,460.
C)£13,510.
D)£11,340.

Question 8

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The flexible budget variance for indirect labour for 2011 is

A)£1,250 F.
B)£50 F.
C)£50 U.
D)£1,200 U.

Question 9

If production was budgeted at 400 units and the actual production was 420 units, what would be the flexible budget variance for materials if the actual cost of materials was £4,150 and the budgeted cost per unit is £10?

A)£50 F
B)£200 U
C)£100 F
D)£150 U

Question 10

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The static budget variance for total fixed overhead is

A)£50 U.
B)£50 F.
C)£-0-.
D)£100 U.

Question 11

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The flexible budget for rent in 2011 is

A)£100.
B)£200.
C)£2,900.
D)£2,950.

Question 12

When budgets are used for control,

A)budgeted amounts from different years are compared.
B)actual amounts from different years are compared.
C)budgeted amounts are compared to actual amounts.
D)None of these is correct.

Question 13

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The static budget variance for direct materials is

A)£100 F.
B)£100 U.
C)£400 F.
D)£400 U.

Question 14

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

A)£2,200 F.
B)£3,000 F.
C)£2,000 F.
D)£1,800 F.

Question 15

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The static budget variance for supplies is

A)£10 U.
B)£10 F.
C)£50 U.
D)£50 F.

Question 16

Figure 16-1
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: $\begin{array}{lr}\text { Unit sales for } 2011 & 26,000 \\\text { Unit production for } 2011 & 26,000\\\\\text { Budgeted fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 800 \\\text { Depreciation } & 2,000 \\ \text { Rent } & 100\\\\\text { Budgeted variable costs per unit: }\\\text { Direct materials } & £ 0.15 \\\text { Direct labour } & 0.20 \\\text { Supplies } & 0.02 \\\text { Indirect labour } & 0.05 \\\text { Power } & 0.02\end{array}$ The following actually occurred: $\begin{array}{ll}\text { Actual unit sales for } 2011 & 24,000 \\\text { Actual unit production for } 2011 & 28,000\\\\\text { Actual fixed overhead for } 2011 \text { : }\\\text { Supervision } & £ 850 \\\text { Depreciation } & 2,000 \\\text { Rent } & 100\\\\\text { Actual variable costs: }\\\text { Direct materials } & £ 3,500 \\\text { Direct labour } & 4,900 \\\text { Supplies } & 530 \\\text { Indirect labour } & 1,250 \\\text { Power } & 470\end{array}$

-Refer to Figure 16-1. The flexible budget variance for supervision for 2011 is

A)£67 F.
B)£67 U.
C)£50 F.
D)none of these.

Question 17

Which of the following is not an objective of responsibility accounting?

A)to redesign processes to be more effective
B)to align individual and organizational goals
C)to influence behaviour
D)to increase profitability

Question 18

The budget most appropriate for control purposes is the

A)static budget.
B)flexible budget.
C)continuous budget.
D)incremental budget.

Question 19

If production was budgeted at 400 units and the actual production was 420 units, what would be the static budget variance for materials if the actual cost of materials was £4,150 and the budgeted cost per unit is £10?

A)£50 F
B)£200 U
C)£100 F
D)£150 U

Question 20

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

A)£52,000.
B)£52,200.
C)£51,200.
D)£51,800.

Question 21

Figure 16-4
Villafane, SA., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Design } & £ 5,000+£ 0.05 \text { per machine hour } \\\text { Machining } & £ 25,000+£ 0.01 \text { per machine hour } \\\text { Setups } & £ 35 \text { per batch } \\\text { Purchasing } & £ 50+£ 15 \text { per purchase order }\end{array}$ Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30 purchase orders $\begin{array}{lr}\text { Design } & £ 5,080 \\\text { Machining } & ? \\\text { Setups } & ? \\\text { Purchasing } & £ 600\end{array}$ The following variances were given in the activity performance report: $\begin{array}{lr}\text { Design } & ? \\\text { Machining } & £ 40 \mathrm{~F} \\\text { Setups } & £ 15 \mathrm{~F} \\\text { Purchasing } & ?\end{array}$

-Refer to Figure 16-4. What is the activity variance for purchasing?

A)£500 U
B)£100 U
C)£50 U
D)none of the above

Question 22

Figure 16-4
Villafane, SA., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Design } & £ 5,000+£ 0.05 \text { per machine hour } \\\text { Machining } & £ 25,000+£ 0.01 \text { per machine hour } \\\text { Setups } & £ 35 \text { per batch } \\\text { Purchasing } & £ 50+£ 15 \text { per purchase order }\end{array}$ Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30 purchase orders $\begin{array}{lr}\text { Design } & £ 5,080 \\\text { Machining } & ? \\\text { Setups } & ? \\\text { Purchasing } & £ 600\end{array}$ The following variances were given in the activity performance report: $\begin{array}{lr}\text { Design } & ? \\\text { Machining } & £ 40 \mathrm{~F} \\\text { Setups } & £ 15 \mathrm{~F} \\\text { Purchasing } & ?\end{array}$

-Refer to Figure 16-4. What is the actual cost of setups?

A)£160
B)£190
C)£300
D)none of the above

Question 23

Figure 16-2
Glenn, SA., has done a cost analysis for its production of T-shirts. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 2 \text { per machine hour } \\\text { Machining } & £ 55,000+£ 3 \text { per machine hour } \\\text { Inspection } & £ 70,000+£ 500 \text { per batch } \\\text { Setups } & £ 2,000 \text { per batch } \\\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }\end{array}$ Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 20,000 \\\text { Machining } & 73,000 \\\text { Inspection } & 73,000 \\\text { Setups } & 18,000 \\\text { Purchasing } & 82,000\end{array}$

-Refer to Figure 16-2. What is the budget variance for machining in an activity-based performance report?

A)£1,000 U
B)£2,000 U
C)£3,000 U
D)none of the above

Question 24

Goal congruence means

A)there is alignment of organizational and managerial goals.
B)the organization is aligned to the needs of the environment.
C)the organization is aligned to shareholder goals.
D)there is no divergence between organization and stockholder goals.

Question 25

Figure 16-2
Glenn, SA., has done a cost analysis for its production of T-shirts. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 2 \text { per machine hour } \\\text { Machining } & £ 55,000+£ 3 \text { per machine hour } \\\text { Inspection } & £ 70,000+£ 500 \text { per batch } \\\text { Setups } & £ 2,000 \text { per batch } \\\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }\end{array}$ Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 20,000 \\\text { Machining } & 73,000 \\\text { Inspection } & 73,000 \\\text { Setups } & 18,000 \\\text { Purchasing } & 82,000\end{array}$

-Refer to Figure 16-2. What is the budget variance for inspection in an activity-based performance report?

A)£1,000 F
B)£2,000 F
C)£3,000 F
D)none of the above

Question 26

An example of a negative incentive is

A)promotion.
B)nonfinancial incentive.
C)feedback reports.
D)termination of employment.

Question 27

Figure 16-4
Villafane, SA., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Design } & £ 5,000+£ 0.05 \text { per machine hour } \\\text { Machining } & £ 25,000+£ 0.01 \text { per machine hour } \\\text { Setups } & £ 35 \text { per batch } \\\text { Purchasing } & £ 50+£ 15 \text { per purchase order }\end{array}$ Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30 purchase orders $\begin{array}{lr}\text { Design } & £ 5,080 \\\text { Machining } & ? \\\text { Setups } & ? \\\text { Purchasing } & £ 600\end{array}$ The following variances were given in the activity performance report: $\begin{array}{lr}\text { Design } & ? \\\text { Machining } & £ 40 \mathrm{~F} \\\text { Setups } & £ 15 \mathrm{~F} \\\text { Purchasing } & ?\end{array}$

-Refer to Figure 16-4. What is the activity variance for design?

A)£40 F
B)£30 U
C)£15 F
D)£100 U

Question 28

Figure 16-3
Harald, SA., has done a cost analysis for its production of bumper stickers. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 0.11 \text { per machine hour } \\\text { Machining } & £ 25,000+£ 0.50 \text { per machine hour } \\\text { Setups } & £ 50 \text { per batch } \\\text { Purchasing } & £ 200+£ 45 \text { per purchase order }\end{array}$ Following are the actual costs of producing 85,000 stickers: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 11,500 \\\text { Machining } & 28,300 \\\text { Setups } & 550 \\\text { Purchasing } & 1,000\end{array}$

-Refer to Figure 16-3. What is the budget variance for total costs in an activity-based performance report?

A)£700 U
B)£700 F
C)£800 U
D)none of the above

Question 29

Which of the following is NOT an advantage of participative budgeting?

A)encourages incrementalism
B)encourages communication
C)encourages responsibility
D)encourages creativity

Question 30

Which of the following is NOT a key feature of an ideal budgetary system?

A)controllable costs
B)single measure for performance
C)incentives
D)frequent feedback

Question 31

Figure 16-2
Glenn, SA., has done a cost analysis for its production of T-shirts. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 2 \text { per machine hour } \\\text { Machining } & £ 55,000+£ 3 \text { per machine hour } \\\text { Inspection } & £ 70,000+£ 500 \text { per batch } \\\text { Setups } & £ 2,000 \text { per batch } \\\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }\end{array}$ Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 20,000 \\\text { Machining } & 73,000 \\\text { Inspection } & 73,000 \\\text { Setups } & 18,000 \\\text { Purchasing } & 82,000\end{array}$

-Refer to Figure 16-2. What is the budget variance for setups in an activity-based performance report?

A)£1,000 F
B)£2,000 F
C)£3,000 F
D)none of the above

Question 32

Figure 16-4
Villafane, SA., has done a cost analysis for its production of decals. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Design } & £ 5,000+£ 0.05 \text { per machine hour } \\\text { Machining } & £ 25,000+£ 0.01 \text { per machine hour } \\\text { Setups } & £ 35 \text { per batch } \\\text { Purchasing } & £ 50+£ 15 \text { per purchase order }\end{array}$ Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30 purchase orders $\begin{array}{lr}\text { Design } & £ 5,080 \\\text { Machining } & ? \\\text { Setups } & ? \\\text { Purchasing } & £ 600\end{array}$ The following variances were given in the activity performance report: $\begin{array}{lr}\text { Design } & ? \\\text { Machining } & £ 40 \mathrm{~F} \\\text { Setups } & £ 15 \mathrm{~F} \\\text { Purchasing } & ?\end{array}$

-Refer to Figure 16-4. What is the actual cost of machining?

A)£24,970
B)£25,010
C)£25,050
D)none of the above

Question 33

Figure 16-2
Glenn, SA., has done a cost analysis for its production of T-shirts. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 2 \text { per machine hour } \\\text { Machining } & £ 55,000+£ 3 \text { per machine hour } \\\text { Inspection } & £ 70,000+£ 500 \text { per batch } \\\text { Setups } & £ 2,000 \text { per batch } \\\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }\end{array}$ Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 20,000 \\\text { Machining } & 73,000 \\\text { Inspection } & 73,000 \\\text { Setups } & 18,000 \\\text { Purchasing } & 82,000\end{array}$

-Refer to Figure 16-2. What is the budget variance for purchasing in an activity-based performance report?

A)£1,000 U
B)£2,000 U
C)£3,000 U
D)none of the above

Question 34

Figure 16-2
Glenn, SA., has done a cost analysis for its production of T-shirts. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 2 \text { per machine hour } \\\text { Machining } & £ 55,000+£ 3 \text { per machine hour } \\\text { Inspection } & £ 70,000+£ 500 \text { per batch } \\\text { Setups } & £ 2,000 \text { per batch } \\\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }\end{array}$ Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 20,000 \\\text { Machining } & 73,000 \\\text { Inspection } & 73,000 \\\text { Setups } & 18,000 \\\text { Purchasing } & 82,000\end{array}$

-Refer to Figure 16-2. What is the budget variance for total costs in an activity-based performance report?

A)£1,000 F
B)£2,000 F
C)£3,000 F
D)none of the above

Question 35

Which of the following is NOT a key feature of an ideal budgetary system?

A)participation
B)incentives
C)accountability for noncontrollable costs
D)feedback on performance

Question 36

Figure 16-3
Harald, SA., has done a cost analysis for its production of bumper stickers. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 0.11 \text { per machine hour } \\\text { Machining } & £ 25,000+£ 0.50 \text { per machine hour } \\\text { Setups } & £ 50 \text { per batch } \\\text { Purchasing } & £ 200+£ 45 \text { per purchase order }\end{array}$ Following are the actual costs of producing 85,000 stickers: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 11,500 \\\text { Machining } & 28,300 \\\text { Setups } & 550 \\\text { Purchasing } & 1,000\end{array}$

-Refer to Figure 16-3. What is the budget variance for maintenance in an activity-based performance report?

A)£50 F
B)£50 U
C)£550 U
D)£550 F

Question 37

Figure 16-3
Harald, SA., has done a cost analysis for its production of bumper stickers. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 0.11 \text { per machine hour } \\\text { Machining } & £ 25,000+£ 0.50 \text { per machine hour } \\\text { Setups } & £ 50 \text { per batch } \\\text { Purchasing } & £ 200+£ 45 \text { per purchase order }\end{array}$ Following are the actual costs of producing 85,000 stickers: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 11,500 \\\text { Machining } & 28,300 \\\text { Setups } & 550 \\\text { Purchasing } & 1,000\end{array}$

-Refer to Figure 16-3. What is the budget variance for setups in an activity-based performance report?

A)£50 F
B)£50 U
C)£800 U
D)none of the above

Question 38

Figure 16-3
Harald, SA., has done a cost analysis for its production of bumper stickers. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 0.11 \text { per machine hour } \\\text { Machining } & £ 25,000+£ 0.50 \text { per machine hour } \\\text { Setups } & £ 50 \text { per batch } \\\text { Purchasing } & £ 200+£ 45 \text { per purchase order }\end{array}$ Following are the actual costs of producing 85,000 stickers: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 11,500 \\\text { Machining } & 28,300 \\\text { Setups } & 550 \\\text { Purchasing } & 1,000\end{array}$

-Refer to Figure 16-3. What is the budget variance for machining in an activity-based performance report?

A)£50 F
B)£50 U
C)£800 U
D)none of the above

Question 39

Figure 16-2
Glenn, SA., has done a cost analysis for its production of T-shirts. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 2 \text { per machine hour } \\\text { Machining } & £ 55,000+£ 3 \text { per machine hour } \\\text { Inspection } & £ 70,000+£ 500 \text { per batch } \\\text { Setups } & £ 2,000 \text { per batch } \\\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }\end{array}$ Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 20,000 \\\text { Machining } & 73,000 \\\text { Inspection } & 73,000 \\\text { Setups } & 18,000 \\\text { Purchasing } & 82,000\end{array}$

-Refer to Figure 16-2. What is the budget variance for maintenance in an activity-based performance report?

A)£1,000 U
B)£3,000 U
C)£3,000 F
D)none of the above

Question 40

Figure 16-3
Harald, SA., has done a cost analysis for its production of bumper stickers. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 11,000+£ 0.11 \text { per machine hour } \\\text { Machining } & £ 25,000+£ 0.50 \text { per machine hour } \\\text { Setups } & £ 50 \text { per batch } \\\text { Purchasing } & £ 200+£ 45 \text { per purchase order }\end{array}$ Following are the actual costs of producing 85,000 stickers: 5,000 machine hours; 10 batches; 20 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 11,500 \\\text { Machining } & 28,300 \\\text { Setups } & 550 \\\text { Purchasing } & 1,000\end{array}$

-Refer to Figure 16-3. What is the budget variance for purchasing in an activity-based performance report?

A)£50 F
B)£50 U
C)£100 U
D)none of the above

Question 41

Figure 16-5
Torino, SA., manufactures machine parts. Torino has developed a static budget for its plant at an activity level of 10,000 direct labour hours for the month of March. The actual level of activity was 11,000 hours. The following table summarizes the static budget and the actual costs for March: $\begin{array}{lccc}&\text { Static Budget } &\text { Actual Costs }\\& (10,000 \mathrm{DLH})& (11,000 \mathrm{DLH}) & \text {Variance}\\ \text { Variable costs } & £ 21,000 & £ 22,000 & £ 1,000 \mathrm{U} \\ \text { Fixed costs } & 7,800 & 7,700 & 100 \mathrm{~F} \\ \text { Total } & £ 28,800 & £ 29,700 & £ 900\mathrm{U} \\ \end{array}$

-Refer to Figure 16-5. What is the flexible budget for March?

A)£28,800
B)£29,800
C)£30,900
D)£31,680

Question 42

Which of the following must be addressed if budgets are to be used in performance evaluation?

A)determine how budgeted amounts should be compared with actual results
B)consider the impact of budgets on human behaviour
C)both a and b
D)neither a nor b

Question 43

A manager of a profit centre:

A)does not control revenues.
B)does not control expenses.
C)does not control investments.
D)only controls revenues.

Question 44

Which cost centre listed below is evaluated with the aid of flexible budgets drawn up for the actual level of activity?

A)discretionary cost centres
B)standard cost centres
C)non-relational cost centres
D)flexible cost centres

Question 45

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

A)Lower level managers could become frustrated if they believe upper management is placing a burden on them for costs out of their control.
B)Managers may resort to unethical practices to compensate for unfavorable results.
C)Efforts to deal with immediate controllable factors could become diluted.
D)All the responses could be correct.

Question 46

Figure 16-5
Torino, SA., manufactures machine parts. Torino has developed a static budget for its plant at an activity level of 10,000 direct labour hours for the month of March. The actual level of activity was 11,000 hours. The following table summarizes the static budget and the actual costs for March: $\begin{array}{lccc}&\text { Static Budget } &\text { Actual Costs }\\& (10,000 \mathrm{DLH})& (11,000 \mathrm{DLH}) & \text {Variance}\\ \text { Variable costs } & £ 21,000 & £ 22,000 & £ 1,000 \mathrm{U} \\ \text { Fixed costs } & 7,800 & 7,700 & 100 \mathrm{~F} \\ \text { Total } & £ 28,800 & £ 29,700 & £ 900\mathrm{U} \\ \end{array}$

-Refer to Figure 16-5. What is the flexible budget variance for March?

A)£-0-
B)£1,200 F
C)£900 U
D)£1,100 F

Question 47

Which of the following departments is likely to be evaluated as a discretionary cost centre?

A)the machining department of an automotive division
B)the food products division of a large PLc
C)the personnel department of an automotive division
D)the Men's shoe department of a department store

Question 48

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: Budgeted variable costs per unit:
$\begin{array}{lr}\text { Direct materials } & £ 11.00 \\\text { Direct labour } & 15.00 \\\text { Supplies } & 0.80 \\\text { Indirect labour } & 1.00 \\\text { Power } & 0.10\end{array}$
Budgeted fixed overhead for 2011 :
$\begin{array}{lr}\text { Supervision } & £ 9,000 \\\text { Depreciation } & 13,000 \\\text { Rent } & 12,000\end{array}$

Question 49

Figure 16-5
Torino, SA., manufactures machine parts. Torino has developed a static budget for its plant at an activity level of 10,000 direct labour hours for the month of March. The actual level of activity was 11,000 hours. The following table summarizes the static budget and the actual costs for March: $\begin{array}{lccc}&\text { Static Budget } &\text { Actual Costs }\\& (10,000 \mathrm{DLH})& (11,000 \mathrm{DLH}) & \text {Variance}\\ \text { Variable costs } & £ 21,000 & £ 22,000 & £ 1,000 \mathrm{U} \\ \text { Fixed costs } & 7,800 & 7,700 & 100 \mathrm{~F} \\ \text { Total } & £ 28,800 & £ 29,700 & £ 900\mathrm{U} \\ \end{array}$

-Refer to Figure 16-5. Which of the following describes the flexible budget variance for March?

A)The fixed overhead variance is £100 F.
B)The variable overhead variance is £1,000 U.
C)The variable overhead variance is £1,100 F.
D)both a and c

Question 50

Controllable costs are those that a manager

A)has no authority over.
B)cannot avoid.
C)does not participate in authorizing.
D)can influence through decision making.

Question 51

Figure 16-5
Torino, SA., manufactures machine parts. Torino has developed a static budget for its plant at an activity level of 10,000 direct labour hours for the month of March. The actual level of activity was 11,000 hours. The following table summarizes the static budget and the actual costs for March: $\begin{array}{lccc}&\text { Static Budget } &\text { Actual Costs }\\& (10,000 \mathrm{DLH})& (11,000 \mathrm{DLH}) & \text {Variance}\\ \text { Variable costs } & £ 21,000 & £ 22,000 & £ 1,000 \mathrm{U} \\ \text { Fixed costs } & 7,800 & 7,700 & 100 \mathrm{~F} \\ \text { Total } & £ 28,800 & £ 29,700 & £ 900\mathrm{U} \\ \end{array}$

-Refer to Figure 16-5. Which of the following describes how well the plant manager performed for the month of March?

A)The manager performed a good job in controlling costs.
B)The manager performed a poor job in controlling costs.
C)The manager exceeded his goals.
D)both a and c

Question 52

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?

A)tight standards
B)well-defined standards
C)budget participation
D)static qualifiers

Question 53

Mertz, SA., has done a cost analysis for its production of flags. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Maintenance } & £ 13,000+£ 2 \text { per machine hour } \\\text { Machining } & £ 45,000+£ 6 \text { per machine hour } \\\text { Inspection } & £ 70,000+£ 500 \text { per batch } \\\text { Setups } & £ 2,000 \text { per batch } \\\text { Purchasing } & £ 80,000+£ 150 \text { per purchase order }\end{array}$ Following are the actual costs of producing 75,000 flags:
1,000 machine hours; 15 batches; 10 purchase orders $\begin{array}{lr}\text { Maintenance } & £ 14,000 \\\text { Machining } & 50,000 \\\text { Inspection } & 70,000 \\\text { Setups } & 32,000 \\\text { Purchasing } & 82,000\end{array}$

Question 54

Riemay, SA., has done a cost analysis for its production of sports cards. The following activities and cost drivers have been developed: $\begin{array}{ll}\text { Activity } & \text { Cost Formula } \\\text { Photography } & £ 50+£ 35 \text { per labour hour } \\\text { Printing } & £ 25,000+£ 0.01 \text { per machine hour } \\\text { Setups } & £ 25 \text { per batch } \\\text { Purchasing } & £ 25+£ 25 \text { per purchase order }\end{array}$ Following are the actual costs of producing 35,000 cards:
60 labour hours; 500 machine hours; 5 batches; 30 purchase orders $\begin{array}{lr}\text { Photography } & ? \\\text { Printing } & £ 25,000 \\\text { Setups } & ? \\\text { Purchasing } & £ 770\end{array}$ The following variances were given in the activity performance report: $\begin{array}{lr}\text { Photography } & £10 \mathrm{~F} \\\text { Printing } & ? \\\text { Setups } & £20 \mathrm{U} \\\text { Purchasing } & ?\end{array}$

Question 55

Which budget should be used to determine how efficiently managers controlled costs?

A)master budget
B)flexible budget
C)static budget
D)cash budget

Question 56

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: $\begin{array}{lll}&\text { Fixed Cost } & \text { Variable Cost } \\\text { Power } & £ 1,000 & £ 0.25 \\\text { Maintenance } & £ 5,000 & £ 0.40 \\\text { Indirect labour } & £ 8,000 & £ 2.00 \\\text { Rent } & £ 12,000 &\end{array}$
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 per cent higher than expected.

Question 57

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

A)the accounting department of a large PLc
B)the automotive division of a large PLc
C)the hardware department of a department store
D)the men's shoe department of a department store

Question 58

Participative budgeting offers which of the following advantages?

A)It offers nonmonetary incentives to employees that may lead to higher levels of employee performance.
B)It involves individuals whose knowledge of local conditions may enhance the budgeting process.
C)It communicates a sense of employee responsibility.
D)All of the above are advantages of participative budgeting.

Question 59

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: $\begin{array}{lc}&\text { Cost Formula }\\\text { Power } & 0.40 \mathrm{X} \\\text { Maintenance } & £ 15,000+0.60 \mathrm{X} \\\text { Indirect labour } & £ 18,000+2.50 \mathrm{X} \\\text { Rent } & £ 20,000\end{array}$
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 per cent lower than expected.

Question 60

Which of the following is NOT a potential disadvantage of participative budgeting?

A)pseudoparticipation
B)performance feedback
C)unrealistic standards
D)budgetary slack