Question 1

Costs incurred indirectly and allocated to a responsibility level are considered to be

Accepted Answer

A)  nonmaterial. 
B)  mixed. 
C)  controllable. 
D)  noncontrollable.

Question 2

Given below is an excerpt from a management performance report: . $\begin{array}{llll}&\text { Budget } & \text { Actual } & \text {Difference }\
\text { Contribution margin } & \$ 600,000 & \$ 580,000 & \$ 20,000 \mathrm{U} \
\text { Controllable fixed costs } & \$ 200,000 & \$ 220,000 & \$ 20,000 \mathrm{U}
\end{array}$ The manager's overall performance

Accepted Answer

A)  is 10% above expectations. 
B)  is 10% below expectations. 
C)  is equal to expectations. 
D)  cannot be determined from the information provided.

Question 3

Controllable costs for responsibility accounting purposes are those costs that are directly influenced by

Accepted Answer

A)  a given manager within a given period of time. 
B)  a change in activity. 
C)  production volume. 
D)  sales volume.

Question 4

Which of the following is not a true statement?

Accepted Answer

A)  All costs are controllable at some level within a company. 
B)  Responsibility accounting applies to both profit and not-for-profit entities. 
C)  Fewer costs are controllable as one moves up to each higher level of managerial responsibility. 
D)  The term segment is sometimes used to identify areas of responsibility in decentralized operations.

Question 5

A department has budgeted monthly manufacturing overhead cost of $540,000 plus $3 per direct labor hour. If a flexible budget report reflects $1,044,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved during the month was

Accepted Answer

A)  528,000 direct labor hours. 
B)  168,000 direct labor hours. 
C)  348,000 direct labor hours. 
D)  Cannot be determined from the information provided.

Question 6

The comparison of differences between actual and planned results

Accepted Answer

A)  is done by the external auditors. 
B)  appears on the company's external financial statements. 
C)  is usually done orally in departmental meetings. 
D)  appears on periodic budget reports.

Question 7

Another name for the static budget is

Accepted Answer

A)  master budget. 
B)  overhead budget. 
C)  permanent budget. 
D)  flexible budget.

Question 8

A static budget report

Accepted Answer

A)  shows costs at only 2 or 3 different levels of activity. 
B)  is appropriate in evaluating a manager's effectiveness in controlling variable costs. 
C)  should be used when the actual level of activity is materially different from the master budget activity level. 
D)  may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.

Question 9

Which of the following will cause an increase in ROI?

Accepted Answer

A)  An increase in variable costs 
B)  An increase in average operating assets 
C)  An increase in sales 
D)  An increase in controllable fixed costs

Question 10

The selection of levels of activity to depict a flexible budget
1.	will be within the relevant range.
2.	is largely a matter of expediency.
3.	is governed by generally accepted accounting principles.

Accepted Answer

A) 	1 
B) 	2 
C) 	3 
D) 	1 and 2

Question 11

The dollar amount of the controllable margin

Accepted Answer

A)  is usually higher than the contribution margin. 
B)  is usually lower than the contribution margin. 
C)  is always equal to the contribution margin. 
D)  cannot be a negative figure.

Question 12

The area manager of the Red, White, and Brew Restaurants is considering two possible expansion alternatives. The required investments, expected controllable margins, and the ROIs of each are as follows: $\begin{array}{lllr}\text { Project }&\text { Investment  }&\text { Controllable Margin }& \mathrm{RO}\
\text { Phoenix } & \$ 120,000 & \$ 30,000 & 25 \% \
\text { Chicago } & \$ 540,000 & \$ 50,000 & 9.25 \%
\end{array}$ The Red, White, and Brew segment has currently $2,000,000 in invested capital and a controllable margin of $250,000. Which one of following projects will increase the Red, White, and Brew division's ROI?

Accepted Answer

A)  Both the Phoenix and Chicago options 
B)  Only the Phoenix option 
C)  Only the Chicago option 
D)  Neither the Phoenix nor the Chicago options

Question 13

Chambers, Inc. uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Chambers had actual overhead costs of $250,000 for 18,000 units produced, what is the difference between actual and budgeted costs?

Accepted Answer

A)  $2,000 unfavorable. 
B)  $2,000 favorable. 
C)  $6,000 unfavorable. 
D)  $8,000 favorable.

Question 14

The master budget is not used in the budgetary control process.

Accepted Answer

A) True 
 B)False

Question 15

Power Manufacturing recorded operating data for its shoe division for the year. $$\begin{array} { l r } 
\text { Sales } & \$ 1,500,000 \
\text { Contribution margin } & 300,000 \
\text { Controllable fixed costs } & 180,000 \
\text { Average total operating assets } & 600,000
\end{array}$$ How much is controllable margin for the year?

Accepted Answer

A)  20% 
B)  50% 
C)  $300,000 
D)  $120,000

Question 16

Which of the following will not result in an unfavorable controllable margin difference?

Accepted Answer

A)  Sales exceeding budget; costs under budget 
B)  Sales exceeding budget; costs over budget 
C)  Sales under budget; costs under budget 
D)  Sales under budget; costs over budget

Question 17

A static budget is an effective means to evaluate a manager's ability to control costs, regardless of the actual activity level.

Accepted Answer

A) True 
 B)False

Question 18

Which one of the following will not increase return on investment?

Accepted Answer

A)  Variable costs are increased 
B)  An increase in sales 
C)  Average operating assets are decreased 
D)  Variable costs are decreased

Question 19

A static budget is appropriate for

Accepted Answer

A)  variable overhead costs. 
B)  direct materials costs. 
C)  fixed overhead costs. 
D)  None of these answers are correct.

Question 20

30. Residual income generates a dollar amount which represents the increase in value to the company beyond the cost necessary to pay for the financing of assets.

Accepted Answer

A) True 
 B)False

Exam 10: Budgetary Control and Responsibility Accounting

Costs incurred indirectly and allocated to a responsibility level are considered to be

Controllable costs for responsibility accounting purposes are those costs that are directly influenced by

Which of the following is not a true statement?

A department has budgeted monthly manufacturing overhead cost of $540,000 plus $3 per direct labor hour. If a flexible budget report reflects $1,044,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved during the month was

The comparison of differences between actual and planned results

Another name for the static budget is

A static budget report

Which of the following will cause an increase in ROI?

The selection of levels of activity to depict a flexible budget 1. will be within the relevant range. 2. is largely a matter of expediency. 3. is governed by generally accepted accounting principles.

The dollar amount of the controllable margin

Chambers, Inc. uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Chambers had actual overhead costs of $250,000 for 18,000 units produced, what is the difference between actual and budgeted costs?

The master budget is not used in the budgetary control process.

Which of the following will not result in an unfavorable controllable margin difference?

A static budget is an effective means to evaluate a manager's ability to control costs, regardless of the actual activity level.

Which one of the following will not increase return on investment?

A static budget is appropriate for

30. Residual income generates a dollar amount which represents the increase in value to the company beyond the cost necessary to pay for the financing of assets.