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

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A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost ÷ activity level).

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What is the purpose of a departmental overhead cost report?


A) To control corporate labour costs
B) To allocate uncontrollable costs
C) To determine the cause of any misuse of costs
D) To control overhead costs

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Surf N Waves planned to sell 27,000 surfboards, however the actual number sold totalled 23,000.Which one of the following provides the best comparison of the cost data associated with the sales?


A) A budget based on the original planned level of activity
B) A budget of 27,000 units of activity
C) A budget of 23,000 units of activity
D) The master budget level of activity

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What effects do increases in plant assets have on ROI?


A) An increase in controllable margin which increases ROI
B) A reduction of ROI
C) An increase in ROI
D) Unable to determine without the dollar amount of controllable margin known

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Management by exception means that management will investigate all areas where actual results are greater than planned results.

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Cost centre managers are evaluated on the profitability of their centres.

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The activity index used in preparing a flexible budget should be the basis of the variable costs that are being budgeted.

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How does a graph of a flexible budget compare to a CVP graph?


A) Fixed costs appear differently.
B) Variable costs appear differently.
C) Sales revenues are not shown on a flexible budget graph.
D) The two are graphed identically.

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What is a profit centre?


A) A division of a company that has never incurred a loss
B) A responsibility centre that incurs costs and generates revenues
C) A centre evaluated by the rate of return earned on the assets allocated to the centre
D) A division of the company that has fewer costs than the other divisions

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Which one of the following describes a responsibility report?


A) It is prepared using the CVP income statement format.
B) It shows all costs that relate to a particular manager's division.
C) It shows only the variable costs in a manager's division.
D) It is prepared at the highest level of managerial responsibility.

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Which one of the following do budget reports provide for managers?


A) The cause of differences between actual and projected amounts
B) The nature of corrective action needed
C) Feedback on operations
D) Modification actions necessary

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Which statement is true concerning a static budget report?


A) It considers performance at numerous activity levels.
B) It is appropriate in evaluating a manager's effectiveness in controlling fixed costs.
C) It should be used when the actual level of activity is materially different from the master budget activity level.
D) It is most effective when evaluating a manager's effectiveness in controlling variable costs.

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What is another name for an indirect fixed cost?


A) A traceable fixed cost
B) A controllable fixed cost
C) A segment fixed cost
D) A common fixed cost

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Which type of centre is the toy department in a Wal-Mart store?


A) An exception centre
B) A profit centre
C) A cost centre
D) An investment centre

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A flexible budget report will compare actual costs with the budgeted costs at the actual activity level achieved.

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The master budget is the basis of developing flexible budgets.

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Haroot Company's master budget shows that the planned activity level for next year is expected to be 20,000 machine hours.At this level of activity, the following manufacturing overhead costs are expected: Haroot Company's master budget shows that the planned activity level for next year is expected to be 20,000 machine hours.At this level of activity, the following manufacturing overhead costs are expected: If the company operates at 21,000 machine hours, how much is allowed on a flexible budget for manufacturing overhead costs? A) $89,250 B) $73,500 C) $88,500 D) $85,000 If the company operates at 21,000 machine hours, how much is allowed on a flexible budget for manufacturing overhead costs?


A) $89,250
B) $73,500
C) $88,500
D) $85,000

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Which one of the following is a distinguishing characteristic of an investment centre?


A) It includes significant uncontrollable fixed costs.
B) Performance can be evaluated with both profitability and return on utilizing assets.
C) This type of responsibility centre only generates revenues.
D) Revenues are rarely generated by selling products.

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Use the following information to answer questions EKPN Company prepared the following data in its static budget based on 150,000 machine hours: Use the following information to answer questions EKPN Company prepared the following data in its static budget based on 150,000 machine hours: -What was the difference between the actual and budgeted Direct Material costs at the actual level of activity? A) $25,000 unfavourable B) $25,000 favourable C) $5,000 favourable D) $5,000 favourable. -What was the difference between the actual and budgeted Direct Material costs at the actual level of activity?


A) $25,000 unfavourable
B) $25,000 favourable
C) $5,000 favourable
D) $5,000 favourable.

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