ACC 560 Week 7 Quiz 10
TRUE-FALSE STATEMENTS
1. Budget reports comparing actual results with planned objectives should be prepared only once a year.
2. If actual results are different from planned results, the difference must always be investigated by management to achieve effective budgetary control.
3. Certain budget reports are prepared monthly, whereas others are prepared more frequently depending on the activities being monitored.
4. The master budget is not used in the budgetary control process.
5. A master budget is most useful in evaluating a manager’s performance in controlling costs.
6. A static budget is one that is geared to one level of activity.
7. A static budget is changed only when actual activity is different from the level of activity expected.
8. A static budget is most useful for evaluating a manager’s performance in controlling variable costs.
9. A flexible budget can be prepared for each of the types of budgets included in the master budget.
10. A flexible budget is a series of static budgets at different levels of activities.
11. Flexible budgeting relies on the assumption that unit variable costs will remain constant within the relevant range of activity.
12. Total budgeted fixed costs appearing on a flexible budget will be the same amount as total fixed costs on the master budget.
13. A flexible budget is prepared before the master budget.
14. The activity index used in preparing a flexible budget should not influence the variable costs that are being budgeted.
15. A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost per unit × activity level).
16. Flexible budgets are widely used in production and service departments.
17. A flexible budget report will show both actual and budget cost based on the actual activity level achieved.
18. Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.
19. Policies regarding when a difference between actual and planned results should be investigated are generally more restrictive for noncontrollable items than for controllable items.
20. A distinction should be made between controllable and noncontrollable costs when reporting information under responsibility accounting.
21. Cost centers, profit centers, and investment centers can all be classified as responsibility centers.
22. More costs become controllable as one moves down to each lower level of managerial responsibility.
23. In a responsibility accounting reporting system, as one moves up each level of responsibility in an organization, the responsibility reports become more summarized and show less detailed information.
24. A cost center incurs costs and generates revenues and cost center managers are evaluated on the profitability of their centers.
25. The terms “direct fixed costs” and “indirect fixed costs” are synonymous with “traceable costs” and “common costs,” respectively.
26. Controllable margin is subtracted from controllable fixed costs to get net income for a profit center.
27. The denominator in the formula for calculating the return on investment includes operating and nonoperating assets.
28. The formula for computing return on investment is controllable margin divided by average operating assets.
a29. When evaluating residual income, the calculation tells management what percentage return was generated by the particular division being evaluated.
a30. 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.
31. Budget reports provide the feedback needed by management to see whether actual operations are on course.
32. A static budget is an effective means to evaluate a manager’s ability to control costs, regardless of the actual activity level.
33. The flexible budget report evaluates a manager’s performance in two areas: (1) production and (2) costs.
34. The terms controllable costs and noncontrollable costs are synonymous with variable costs and fixed costs, respectively.
35. Most direct fixed costs are not controllable by the profit center manager.
36. The manager of an investment center can improve ROI by reducing average operating assets.
a37. Residual income and ROI are used as performance evaluation methods for profit center performance
MULTIPLE CHOICE QUESTIONS
38. What is budgetary control?
a. Another name for a flexible budget
b. The degree to which the CFO controls the budget
c. The use of budgets in controlling operations
d. The process of providing information on budget differences to lower level managers
39. A major element in budgetary control is
a. the preparation of long-term plans.
b. the comparison of actual results with planned objectives.
c. the valuation of inventories.
d. approval of the budget by the stockholders.
40. Budget reports should be prepared
a. daily.
b. monthly.
c. weekly.
d. as frequently as needed.
41. On the basis of the budget reports,
a. management analyzes differences between actual and planned results.
b. management may take corrective action.
c. management may modify the future plans.
d. All of these.
42. The purpose of the departmental overhead cost report is to
a. control indirect labor costs.
b. control selling expense.
c. determine the efficient use of materials.
d. control overhead costs.
43. The purpose of the sales budget report is to
a. control selling expenses.
b. determine whether income objectives are being met.
c. determine whether sales goals are being met.
d. control sales commissions.
44. The comparison of differences between actual and planned results
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.
45. A static budget
a. should not be prepared in a company.
b. is useful in evaluating a manager’s performance by comparing actual variable costs and planned variable costs.
c. shows planned results at the original budgeted activity level.
d. is changed only if the actual level of activity is different than originally budgeted.
46. A static budget report
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.
47. A static budget is appropriate in evaluating a manager’s performance if
a. actual activity closely approximates the master budget activity.
b. actual activity is less than the master budget activity.
c. the company prepares reports on an annual basis.
d. the company is a not-for-profit organization.
48. When budgeted and actual results are not the same amount, there is a budget
a. error.
b. difference.
c. anomaly.
d. by-product.
49. Top management’s reaction to a difference between budgeted and actual sales often depends on
a. whether the difference is favorable or unfavorable.
b. whether management anticipated the difference.
c. the materiality of the difference.
d. the personality of the top managers.
50. If costs are not responsive to changes in activity level, then these costs can be best described as
a. mixed.
b. flexible.
c. variable.
d. fixed.
51. Assume that actual sales results exceed the planned results for the second quarter. This favorable difference is greater than the unfavorable difference reported for the first quarter sales. Which of the following statements about the sales budget report on June 30 is true?
a. The year-to-date results will show a favorable difference.
b. The year-to-date results will show an unfavorable difference.
c. The difference for the first quarter can be ignored.
d. The sales report is not useful if it shows a favorable and unfavorable difference for the two quarters.
52. A static budget is appropriate for
a. variable overhead costs.
b. direct materials costs.
c. fixed overhead costs.
d. None of these.
53. What is the primary difference between a static budget and a flexible budget?
a. The static budget contains only fixed costs, while the flexible budget contains only variable costs.
b. The static budget is prepared for a .strtutorials.com/ACC-560-WK-7-Quiz-10-All-Possible-Questions-026.htm” style=”margin: 0px; padding: 0px; border: 0px; outline: 0px; vertical-align: baseline; color: rgb(155, 136, 31);”>SINGLE level of activity, while a flexible budget is adjusted for different activity levels.
c. The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management.
d. The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold.
54. Another name for the static budget is
a. master budget.
b. overhead budget.
c. permanent budget.
d. flexible budget.
55. The master budget of Windy Co. shows that the planned activity level for next year is expected to be 50,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:
Indirect labor $720,000
Machine supplies 180,000
Indirect materials 210,000
Depreciation on factory building 150,000
Total manufacturing overhead $1,260,000
A flexible budget for a level of activity of 60,000 machine hours would show total manufacturing overhead costs of
a. $1,482,000.
b. $1,260,000.
c. $1,512,000.
d. $1,362,000.
56. Boland Manufacturing prepared a 2013 budget for 120,000 units of product. Actual production in 2013 was 130,000 units. To be most useful, what amounts should a performance report for this company compare?
a. The actual results for 130,000 units with the original budget for 120,000 units.
b. The actual results for 130,000 units with a new budget for 130,000 units.
c. The actual results for 130,000 units with last year’s actual results for 134,000 units.
d. It doesn’t matter. All of these choices are equally useful.
57. 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
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.
58. Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets?
a. Direct materials cost
b. Direct labor cost
c. Variable manufacturing overhead
d. Fixed manufacturing overhead
59. In developing a flexible budget within a relevant range of activity,
a. only fixed costs are included.
b. it is necessary to relate variable cost data to the activity index chosen.
c. it is necessary to prepare a budget at 1,000 unit increments.
d. variable and fixed costs are combined and are reported as a total cost.
60. What budgeted amounts appear on the flexible budget?
a. Original budgeted amounts at the static budget activity level
b. Actual costs for the budgeted activity level
c. Budgeted amounts for the actual activity level achieved
d. Actual costs for the estimated activity level
More Questions are Included