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Exam 23: Budgetary Control and Responsibility Accounting

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Question 21

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Sales results that are evaluated by a static budget might show 1) favorable differences that are not justified. 2) unfavorable differences that are not justified.

A) 1
B) 2
C) both 1 and 2.
D) neither 1 nor 2.

E) A) and C)
F) A) and B)

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Question 22

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More costs become controllable as one moves down to each lower level of managerial responsibility.

A) True
B) False

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Question 23

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Management by exception

In developing a flexible budget within a relevant range of activity,

If a company plans to sell 48,000 units of product but sells 60,000, the most appropriate comparison of the cost data associated with the sales will be by a budget based on

A company's planned activity level for next year is expected to A flexible budget prepared at the 80,000 machine hours level of activity would show total manufacturing overhead costs of

Cody Co. developed its annual manufacturing overhead budget for its master budget for 2016 as follows: The relevant range for monthly activity is expected to be between 8,000 and 12,000 direct labor hours. Instructions Prepare a flexible budget for a monthly activity level of 8,000 and 9,000 direct labor hours.

The linens department of a large department store is

Sage Division's operating results include: $\bullet$ Controllable margin, $300,000 $\bullet$ Sales revenue, $2,400,000 $\bullet$ Operating assets, $1,000,000 Sage is considering a project with sales of $240,000, expenses of $168,000, and an investment of $360,000. Sage's required rate of return is 15%. Instructions Determine whether Sage should accept this project.

A cost center

Berne, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: The company believes it will normally operate in a range of 2,000 to 4,000 machine hours per month. Instructions Prepare a flexible manufacturing overhead budget for the expected range of activity, using increments of 1,000 machine hours.

A flexible budget depicted graphically

Stone Industries uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $48,000 variable and $270,000 fixed. If Stone had actual overhead costs of $321,000 for 18,000 units produced, what is the difference between actual and budgeted costs?

Which responsibility centers generate both revenues and costs?

Nikoto Steel Co. budgeted manufacturing costs for 50,000 tons of steel are: Fixed manufacturing costs $50,000 per month Variable manufacturing costs $12.00 per ton of steel Nikoto produced 40,000 tons of steel during March. How much is the flexible budget for total manufacturing costs for March?

A master budget is most useful in evaluating a manager's performance in controlling costs.

Point, Inc. produces men's shirts. The following budgeted and actual amounts are for 2016: Instructions Prepare a performance report for Point, Inc. for the year.

The purpose of the sales budget report is to

A distinction should be made between controllable and noncontrollable costs when reporting information under responsibility accounting.

If an investment center has a $90,000 controllable margin and $1,200,000 of sales, what average operating assets are needed to have a return on investment of 10%?