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Exam 21: Budgetary Control and Responsibility Accounting

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Question 31

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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.

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Question 32

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All of the following statements are correct about controllable costs except

A) all costs are controllable at some level of responsibility within a company.
B) all costs are controllable by top management.
C) fewer costs are controllable as one moves up to each higher level of managerial responsibility.
D) costs incurred directly by a level of responsibility are controllable at that level.

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Question 33

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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

If an investment center has generated a controllable margin of $150,000 and sales of $600,000, what is the return on investment for the investment center if average operating assets were $1,000,000 during the period?

A responsibility report should

Given below is an excerpt from a management performance report: $\begin{array}{llll}&\text { Budget}&\text { Actual}&\text { Difference }\\\text { Contribution margin } & \$ 1,000,000 & \$ 1,050,000 & \$ 50,000 \\\text { Controllable fixed costs } & \$ 500,000 & \$ 450,000 & \$ 50,000\end{array}$ The manager's overall performance

The formula for computing return on investment is controllable margin divided by average operating assets.

If costs are not responsive to changes in activity level, then these costs can be best described as

A static budget report is appropriate for

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:

Rhein Manufacturing recorded operating data for its auto accessories division for the year. $\begin{array}{lr}\text { Sales } & \$ 750,000 \\\text { Contribution margin } & 150,000 \\\text { Total direct fixed costs } & 90,000 \\\text { Average total operating assets } & 400,000\end{array}$ How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30,000, assuming fixed costs are held constant?

To develop the flexible budget, management takes all of the following steps except identify the

A flexible budget report will show both actual and budget cost based on the actual activity level achieved.

Cost centers, profit centers, and investment centers can all be classified as responsibility centers.

A responsibility report for a profit center will

Griffin Corp. is evaluating its Piquette division, an investment center. The division has a $60,000 controllable margin and $400,000 of sales. How much will Griffin's average operating assets be when its return on investment is 10%?

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 cost center

Management by exception

Top management can control