Question ACC556 Financial Accounting for Managers

09 Jun Question ACC556 Financial Accounting for Managers

Question
ACC556 Financial Accounting for Managers

CHAPTER 22 EXERCISE

Question 1 Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.

Answers:

True

False

Question 2 Budget reports provide the feedback needed by management to see whether actual operations are on course.

Answers:

True

False

Question 3 The manager of an investment center can improve ROI by reducing average operating assets.

Answers:

True

False

Question 4 What is budgetary control?

Answers:

Another name for a flexible budget

The degree to which the CFO controls the budget

The use of budgets in controlling operations

The process of providing information on budget differences to lower level managers

Question 5 What is the primary difference between a static budget and a flexible budget?

Answers:

The static budget contains only fixed costs, while the flexible budget contains only variable costs.

The static budget is prepared for a single level of activity, while a flexible budget is adjusted for different activity levels.

The static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management.

The static budget is prepared only for units produced, while a flexible budget reflects the number of units sold.

Question 6 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

Answers:

the original planned level of activity.

54,000 units of activity.

60,000 units of activity.

48,000 units of activity.

Question 7 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?

Selected Answer:

$530,000

Answers:

$520,000

$650,000

$480,000

$530,000

Question 8 At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials:

Answers:

$1,400 unfavorable.

$1,400 favorable.

$600 favorable.

$600 unfavorable.

Question 9 Given below is an excerpt from a management performance report:

Budget Actual Difference

Contribution margin $600,000 $580,000 $20,000 U

Controllable fixed costs $200,000 $220,000 $20,000 U

The manager’s overall performance

Answers:

is 10% above expectations.

is 10% below expectations.

is equal to expectations.

cannot be determined from the information provided.

Question 10 Bogey Co. recorded operating data for its Cheap division for the year. Bogey requires its return to be 10%.

Sales $ 1,400,000

Controllable margin 160,000

Total average assets 4,000,000

Fixed costs 100,000

What is the ROI for the year?

Answers:

4%

35%

6%

1.5%

Question 11 A measure frequently used to evaluate the performance of the manager of an investment center is

Answers:

the amount of profit generated.

the rate of return on funds invested in the center.

the percentage increase in profit over the previous year.

departmental gross profit.

Question 12 What is the goal of residual income?

Answers:

To maximize the amount of costs which are controllable

To maximize profits

To maximize the total amount of residual income

To maximize controllable margin

Question 13 Match the items below by entering the appropriate code letter in the space provided.

.9pt”>
The use of budgets to control operations.

.8pt”>

Budgetary control

.9pt”>
A projection of budget data at one level of activity.

.8pt”>

Static budget

.9pt”>
A projection of budget data for various levels of activity.

.8pt”>

Flexible budget

.9pt”>
A part of management accounting that involves accumulating and reporting revenues and costs on the basis of the individual manager who has the authority to make the day-to-day decisions about the items.

.8pt”>

Responsibility accounting

.9pt”>
Costs that a manager has the authority to incur within a given period of time.

.8pt”>

Controllable costs

.9pt”>
The review of budget reports by top management directed entirely or primarily to differences between actual results and planned objectives.

.8pt”>

Management by exception

.9pt”>
The preparation of reports for each level of responsibility shown in the company’s organization chart.

.8pt”>

Responsibility reporting system

.9pt”>
A measure of the profitability of an investment center computed by dividing controllable margin (in dollars) by average operating assets.

.8pt”>

Return on Investment

.9pt”>
A responsibility center that incurs costs and also generates revenues.

.8pt”>

Profit center

.9pt”>
A responsibility center that incurs costs, generates revenues, and has control over the investment funds available for use.

.8pt”>

Investment center

.9pt”>
Costs which are incurred for the benefit of more than one profit center.

.8pt”>

Indirect fixed costs

.9pt”>