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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\begin{array}{lr}\text { Sales } & \$ 1,400,000 \\\text { Controllable margin } & 160,000 \\\text { Total average assets } & 4,000,000 \\\text { Fixed costs } & 100,000\end{array} What is the ROI for the year?


A) 4%
B) 35%
C) 6%
D) 1.5%

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Which one of the following does not impact the amount of residual income?


A) Contribution margin
B) Net income
C) Sales
D) Controllable costs

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Benet Division of United Refinery Company's operating results include: controllable margin, $200,000; sales $2,200,000; and operating assets, $800,000.The Benet Division's ROI is 25%.Management is considering a project with sales of $100,000, variable expenses of $60,000, fixed costs of $40,000; and an asset investment of $150,000.Should management accept this new project?


A) No, since ROI will be lowered.
B) Yes, since ROI will increase.
C) Yes, since additional sales always mean more customers.
D) No, since a loss will be incurred.

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

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Dingo Division's operating results include: controllable margin of $150,000, sales totaling $1,200,000, and average operating assets of $500,000.Dingo is considering a project with sales of $100,000, expenses of $86,000, and an investment of average operating assets of $200,000.Dingo's required rate of return is 9%.Should Dingo accept this project?


A) Yes, ROI will drop by 6.6% which is still above the minimum required rate of return.
B) No, the return is less than the required rate of 9%.
C) Yes, ROI still exceeds the cost of capital.
D) No, ROI will decrease to 7%.

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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.

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Total budgeted fixed costs appearing on a flexible budget will be the same amount as total fixed costs on the master budget.

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Rhein Manufacturing recorded operating data for its auto accessories division for the year.  Sales $750,000 Contribution margin 150,000 Total direct fixed costs 90,000 Average total operating assets 400,000\begin{array} { l r } \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?


A) 45.0%
B) 22.5%
C) 15.0%
D) 12.0%

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The Fulmar Division of Jayne Manufacturing had an ROI of 25% when sales were $3 million and controllable margin was $600,000.What were the average operating assets?


A) $150,000
B) $750,000
C) $2,400,000
D) $12,000

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Controllable margin is most useful for


A) external financial reporting.
B) preparing the master budget.
C) performance evaluation of profit centers.
D) break-even analysis.

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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 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.

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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.

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The flexible budget


A) is prepared before the master budget.
B) is relevant both within and outside the relevant range.
C) eliminates the need for a master budget.
D) is a series of static budgets at different levels of activity.

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A flexible budget can be prepared for each of the types of budgets included in the master budget.

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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.

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A distinguishing characteristic of an investment center is that


A) revenues are generated by selling and buying stocks and bonds.
B) interest revenue is the major source of revenues.
C) the profitability of the center is related to the funds invested in the center.
D) it is a responsibility center which only generates revenues.

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A flexible budget


A) is prepared when management cannot agree on objectives for the company.
B) projects budget data for various levels of activity.
C) is only useful in controlling fixed costs.
D) cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results.

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A cost center


A) only incurs costs and does not directly generate revenues.
B) incurs costs and generates revenues.
C) is a responsibility center of a company which incurs losses.
D) is a responsibility center which generates profits and evaluates the investment cost of earning the profit.

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Nikoto Steel Co.budgeted manufacturing costs for 50,000 tons of steel are: Fixed manufacturing costs $50,000\quad \$ 50,000 per month Variable manufacturing costs $12.00\quad \$ 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) $520,000
B) $650,000
C) $480,000
D) $530,000

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Budget reports should be prepared


A) daily.
B) monthly.
C) weekly.
D) as frequently as needed.

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