Question 1

Which statement is true about the activity index used in preparing the flexible budget?

Accepted Answer

A)  It applies only to fixed manufacturing costs.
B)  It is the same for all departments of the company.
C)  It significantly influences the variable costs that are being budgeted.
D)  It is irrelevant to total costs.E) All of the above
F) C) and D)

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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

Accepted Answer

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.E) All of the above
F) None of the above

Question 4

Which one of the following is a performance indicator for an investment centre, but NOT for a profit centre?

Accepted Answer

A)  controllable margin
B)  asset utilization effectiveness
C)  revenues
D)  controllable costsE) A) and B)
F) C) and D)

Question 5

Which one of the following will increase return on investment?

Accepted Answer

A)  Variable costs are increased.
B)  Sales are increased.
C)  Average operating assets are increased.
D)  Fixed costs are increased.E) A) and B)
F) A) and D)

Question 6

A manager determined that certain costs were NOT responsive to changes in activity level.What are these costs?

Accepted Answer

A)  mixed
B)  flexible
C)  variable
D)  fixedE) B) and C)
F) C) and D)

Question 7

Nextel Communications uses management by exception.Which differences between planned and actual results will it investigate?

Accepted Answer

A)  those that are material and non-controllable
B)  those that are controllable and non-controllable
C)  those that are material and controllable
D)  All differences should be investigated.E) B) and C)
F) A) and D)

Question 8

Direct fixed costs are synonymous with common costs.

Accepted Answer

A) True 
 B)False

Question 9

When is a static budget most appropriate in evaluating a manager's performance?

Accepted Answer

A)  when the actual costs incurred equal the amounts in the budget
B)  when the actual activity is less than the master budget activity
C)  when the company performed at the same activity level as the static budget level
D)  The static budget is not appropriate for evaluating managers.E) B) and D)
F) C) and D)

Question 10

What is another name for an indirect fixed cost?

Accepted Answer

A)  a traceable fixed cost
B)  a controllable fixed cost
C)  a segment fixed cost
D)  a common fixed costE) A) and B)
F) None of the above

Question 11

What is a segment?

Accepted Answer

A)  a non-controllable cost
B)  an area of responsibility in decentralized operations
C)  another name for a cost centre
D)  a division which contains both controllable and non-controllable costsE) None of the above
F) C) and D)

Question 12

For which of the following is an investment centre manager responsible?

Accepted Answer

A)  invested assets, sales, and costs
B)  sales, profits, and invested assets
C)  sales, invested assets, and assets
D)  revenues and costsE) A) and C)
F) All of the above

Question 13

Which one of the following is true of a flexible budget?

Accepted Answer

A)  It is prepared when managers are unsure of activity levels.
B)  It projects budget data at a pre-planned level of activity.
C)  It is useful in controlling variable and fixed costs.
D)  It shows no differences between actual and budgeted amounts because it is prepared after the actual results are determined.E) None of the above
F) C) and D)

Question 14

What is the preparation of reports for each level of responsibility in the company's organization chart called?

Accepted Answer

A)  static reporting
B)  responsibility reporting
C)  exception reporting
D)  master budgeting analysisE) B) and C)
F) A) and D)

Question 15

What centres receive responsibility reports containing budgeted and actual controllable revenues and costs?

Accepted Answer

A)  investment centres
B)  profit centres
C)  cost centres
D)  investment, profit, and cost centresE) A) and D)
F) A) and C)

Question 16

What is the purpose of a departmental overhead cost report?

Accepted Answer

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 costsE) A) and B)
F) A) and C)

Question 17

Which one of the following is another name for the static budget?

Accepted Answer

A)  flexible budget
B)  operating budget
C)  permanent budget
D)  master budgetE) All of the above
F) None of the above

Question 18

Which of the following will most likely result in a favourable controllable margin difference?

Accepted Answer

A)  sales exceeding budget; costs under budget
B)  sales exceeding budget; costs over budget
C)  sales under budget; costs under budget
D)  sales under budget; costs over budgetE) B) and D)
F) None of the above

Question 19

What will you expect to find on a responsibility report for a profit centre?

Accepted Answer

A)  only direct costs
B)  no indirect fixed costs
C)  all fixed costs-both controllable and non-controllable
D)  controllable marginE) None of the above
F) C) and D)

Question 20

Which statement is true concerning a cost centre?

Accepted Answer

A)  It incurs costs and generates revenues.
B)  It only exists in companies in which costs exceed revenues.
C)  It is evaluated most effectively using ROI.
D)  It is usually a production or service department.E) A) and D)
F) C) and D)

Exam 11: Budgetary Control and Responsibility Accounting

Direct fixed costs are synonymous with common costs.

Correct AnswerverifiedShow Answer

Which statement is true concerning a cost centre?

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Which statement is true about the activity index used in preparing the flexible budget?

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Which one of the following will increase return on investment?

Correct AnswerverifiedShow Answer

Which one of the following is true of a flexible budget?

Correct AnswerverifiedShow Answer

What centres receive responsibility reports containing budgeted and actual controllable revenues and costs?

Correct AnswerverifiedShow Answer

What is another name for an indirect fixed cost?

Correct AnswerverifiedShow Answer

When is a static budget most appropriate in evaluating a manager's performance?

Correct AnswerverifiedShow Answer

Which of the following will most likely result in a favourable controllable margin difference?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Nextel Communications uses management by exception.Which differences between planned and actual results will it investigate?

Correct AnswerverifiedShow Answer

What is the purpose of a departmental overhead cost report?

Correct AnswerverifiedShow Answer

What will you expect to find on a responsibility report for a profit centre?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is a segment?

Correct AnswerverifiedShow Answer

Which one of the following is a performance indicator for an investment centre, but NOT for a profit centre?

Correct AnswerverifiedShow Answer

A manager determined that certain costs were NOT responsive to changes in activity level.What are these costs?

Correct AnswerverifiedShow Answer

For which of the following is an investment centre manager responsible?

Correct AnswerverifiedShow Answer

What is the preparation of reports for each level of responsibility in the company's organization chart called?

Correct AnswerverifiedShow Answer

Which one of the following is another name for the static budget?

Correct AnswerverifiedShow Answer

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