Chapter 11 - MCQ PDF

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Multiple choice as well as math problems....

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CH 11 Evaluating a manager's performance in controlling variable costs is effectively achieved using a static budget. True False Management by exception means that management will investigate all areas where actual results are greater than planned results. True False Cost centre managers are evaluated on the profitability of their centres. True False Residual income and ROI are used as performance evaluation methods for profit centre performance. True False A good plan is the foundation for effective control. True False Responsibility accounting is not especially valuable in a decentralized company. True False Budget reports comparing actual results with planned objectives should be prepared weekly to be most effective. True False

The master budget is the basis of developing flexible budgets. True False A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost ÷ activity level). True False Direct fixed costs are synonymous with common costs. True False What is the purpose of a departmental overhead cost report? to control corporate labour costs to allocate uncontrollable costs to determine the cause of any misuse of costs to control overhead costs Which one of the statements below is correct concerning the comparison of differences between actual and planned results? The difference must be reported on external financial statements. The differences always require investigation. It reflects information from the static budget. It enables managers to take corrective action when differences are material. When is a static budget most appropriate in evaluating a manager's performance? When the actual costs incurred equal the amounts in the budget. When the actual activity is less than the master budget activity. When the company performed at the same activity level as the static budget level. The static budget is not appropriate for evaluating managers.

Which statement is true concerning a static budget report? It considers performance at numerous activity levels. It is appropriate in evaluating a manager's effectiveness in controlling fixed costs. It should be used when the actual level of activity is materially different from the master budget activity level. It is most effective when evaluating a manager's effectiveness in controlling variable costs. Yellow Card Company compared its actual sales results with a static budget. Which of the following situations might result? favourable differences that are not justified unfavourable differences that are not justified either favourable or unfavourable differences that are not justified actual differences that are justified Which one of the following statements is true in developing a flexible budget within a relevant range of activity? The budget must reflect a fixed level of activity. Total variable costs should be adjusted based on the activity index chosen. Costs cannot increase when different levels of activity exist. Fixed costs are not reported. For which of the budgets in the master budget can a company prepare a flexible budget? only the sales budget only the income statement budget only the budgets that reflect operations all of the budgets What assumption about the behaviour of total costs occurs within the relevant range of activity? linear and upward sloping linear and downward sloping curvilinear and upward sloping horizontal

Nextel Communications uses management by exception. Which differences between planned and actual results will it investigate? those that are material and non-controllable those that are controllable and non-controllable those that are material and controllable all differences should be investigated Flexible budgets imply that sales managers can have a wide latitude in modifying prices during the year. that a firm will have different levels of activity and costs during a year. the budget process may not be accurate at the beginning of the budget year. each manager is free to change the budget as the year progresses. Under responsibility accounting, both controllable and non-controllable costs receive the same attention. cost centres are NOT classified as responsibility centres since there is no revenue responsibility. as one moves up each level of responsibility in an organization, the responsibility reports become more detailed. a manager’s performance is evaluated based on matters that are directly under that manager’s control. What is the preparation of reports for each level of responsibility in the company’s organization chart called? static reporting responsibility reporting exception reporting master budgeting analysis Which one of the following describes a responsibility report? It is prepared using the CVP income statement format. It shows all costs that relate to a particular manager’s division. It shows only the variable costs in a manager’s division.

It is prepared at the highest level of managerial responsibility. Which type of centre is the toy department in a Wal-Mart store? an exception centre a profit centre a cost centre an investment centre What will you expect to find on a responsibility report for a profit centre? only direct costs no indirect fixed costs all fixed costs—both controllable and non-controllable controllable margin What is a profit centre? A division of a company that has never incurred a loss. A responsibility centre that incurs costs and generates revenues. A centre evaluated by the rate of return earned on the assets allocated to the centre. A division of the company that has fewer costs than the other divisions.

Crane Company prepared the following data in its static budget based on 130000 machine hours:

What is the budgeted Direct Labour cost at the actual level of activity? budgeted DL cost @ actual activity level = (budgeted DL costs ÷ budgeted activity level) × actual activity level A department has budgeted monthly fixed manufacturing overhead cost of $37100 plus $4 per direct labour hour. The flexible budget report reflects $133000 for total budgeted manufacturing cost for the month. What is the budgeted level of activity to be achieved during the month? 42525 direct labour hours 33250 direct labour hours 23975 direct labour hours cannot be determined Actual level of activity achieved during the month = (Total budgeted MC - budgeted FMOH costs) ÷ budged VMOH Bonita Toasters prepared a 2020 budget for 40900 units of product. Actual production in 2020 was 44700 units. To be most useful, what amounts should a performance report for this company compare? The actual results for 44700 units with the original budget for 40900 units. The actual results for 44700 units with a new budget for 44700 units. The actual results for 44700 units with last year’s actual results for 46700 units. It doesn’t matter. All of these choices are equally useful.

For its three investment centres, Stahl Company accumulates the following data:

ROI= Controllable Margin*100/Average operating Asset Calculate the return on investment (ROI) for each centre. 21, 26, 33 Wade Company expects to produce 6,600 units of product IOA during the current year. Budgeted variable manufacturing costs per unit are direct materials $5, direct labour $11, and overhead $18. Monthly budgeted fixed manufacturing overhead costs are $7,900 for depreciation and $4,000 for supervision. In the current month, Wade produced 7,100 units and incurred the following costs: direct materials $33,330, direct labour $73,600, variable overhead $138,996, depreciation $7,900, and supervision $4,232. Prepare a static budget report. (List variable costs before fixed costs.)

Comparative data on three companies operating in the same industry follow. The minimum required ROI is 10% for all three companies. Determine the missing amounts. (Round asset turnover of Company B and return on investment of Company C to 1 decimal place, e.g. 15.2 or 15.2% and all other answers to 0 decimal places, e.g. 152. Enter negative amounts using either a negative sign preceding the number e.g. -45 or parentheses e.g. (45).)...