Question 1

What budgeted amounts appear on the flexible budget?

Accepted Answer

The flexible budget includes budgeted amounts for the actual activity level achieved, which allows for a more accurate comparison to actual costs. The original budgeted amounts at the static budget activity level (A) are not as useful when comparing to actual costs. Actual costs for the budgeted activity level (B) and actual costs for the estimated activity level (D) are not included in the flexible budget.

Question 2

Which one of the following describes a responsibility report?

Accepted Answer

The answer of Which one of the following describes a...

Question 3

Which type of centre is the theme park division of Walt Disney Company?

Accepted Answer

The answer of Which type of centre is the theme...

Question 4

Which statement is true concerning management by exception?

Accepted Answer

Management by exception is a technique in which managers focus their attention on areas that deviate from the norm, rather than spending time on areas that are operating as expected. By doing so, managers can quickly identify and address problem areas, which can improve overall efficiency and performance.

Question 5

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

Accepted Answer

The toy department in a Wal-Mart store is a profit centre because it generates revenue for the company through the sale of toys.

Question 6

Perot Manufacturing reported the following items for 2016: $$\begin{array} { l r } 
\text { Income tax expense } & \$ 40,000 \
\text { Contribution margin } & 125,000 \
\text { Controllable fixed costs } & 30,000 \
\text { Interest expense } & 10,000 \
\text { Total operating assets } & 475,000
\end{array}$$ How much is controllable margin?

Accepted Answer

Controllable margin is calculated by subtracting controllable fixed costs from the contribution margin: $125,000 - $30,000 = $95,000.

Question 7

Which of the following correctly indicates the responsibilities of the respective centre?

Accepted Answer

The answer of Which of the following correctly indicates the...

Question 8

Roasted Toasters prepared a 2016 budget for 40,000 units of product.Actual production in 2016 was 45,000 units.To be most useful, what amounts should a performance report for this company compare?

Accepted Answer

A performance report should compare the actual results with a flexible budget that reflects the actual level of activity, which in this case is 45,000 units.

Question 9

Which type of centre is the housekeeping department of a manufacturing company?

Accepted Answer

The housekeeping department of a manufacturing company is a cost centre, as it involves activities that do not directly generate revenue, such as cleaning and maintaining the facilities. Its purpose is to support the manufacturing process and ensure a safe and clean working environment for employees.

Question 10

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

Accepted Answer

Profit centres receive responsibility reports containing both budgeted and actual controllable revenues and costs, as they are responsible for generating revenue and controlling costs, unlike cost centres which only focus on costs, and investment centres which are concerned with investment returns as well.

Question 11

Which of the following is a true statement?

Accepted Answer

Controllability of costs refers to the degree to which costs can be influenced by the actions of a manager at any level within an organization. While not all costs are directly controllable by lower-level managers, at some level within the company (e.g., senior management), there is the ability to control or influence all costs. This concept is fundamental to responsibility accounting, which holds managers accountable for those costs and revenues that they can control.

Question 12

Which statement is true concerning a cost centre?

Accepted Answer

A cost centre is a department or unit within a company that incurs costs but does not generate revenue directly. It is responsible for managing and controlling costs related to a specific function or activity within the company, such as production or service delivery. Therefore, choice D is the best answer. Choices A, B and C are incorrect because they do not accurately describe the nature of a cost centre.

Question 13

Flexible budgets imply

Accepted Answer

Flexible budgets are designed to allow for variations in activity levels and costs during the year. This means that the budget can be adjusted to reflect changes in sales volume, production levels, and other factors that can impact costs. It does not necessarily mean that sales managers have the freedom to change prices at will or that the budget process is inaccurate at the beginning of the year. Each manager may have input into the budget, but it is typically created based on careful analysis and planning.

Question 14

What is a segment?

Accepted Answer

A segment refers to an area of responsibility in decentralized operations where a manager has control over both the revenue and expenses. This allows for better decision-making and accountability at the segment level. Therefore, choice B is the best answer. A, C, and D are incorrect because they do not accurately describe what a segment is.

Question 15

TrueMasons' budgeted costs for 25,000 linear metres of block are: $\begin{array}{cc}
  \text { Fixed manufacturing costs } & \text {$\$ 12,000$ per month } \
 \text { Variable manufacturing costs } & \text { $\$ 16.00$ per linear metre } \
\end{array}$
 True Masons installed 20,000 linear metres of block during March.How much is budgeted total manufacturing costs in March on TrueMason's flexible budget?

Accepted Answer

The flexible budget adjusts for the actual level of activity. For 20,000 linear metres, the variable cost is $20,000 \times 16 = \$320,000$. Adding the fixed cost of \$12,000 gives a total of \$332,000.

Question 16

When setting a flexible budget it is important to know

Accepted Answer

A flexible budget is one that is adjusted to reflect changes in activity levels. Therefore, it is important to know the relevant ranges of activity and cost so that the budget can be adjusted accurately. The expected profit or return may influence overall budget decisions, but it is not specific to setting a flexible budget. Inflation may also impact the budget, but it is not necessarily a factor in setting a flexible budget.

Question 17

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

Accepted Answer

The preparation of reports for each level of responsibility in the company's organization chart is called responsibility reporting. This type of reporting provides information to managers at all levels of the organization to help them make decisions based on their areas of responsibility. Static reporting refers to reports that are produced regularly and do not change over time, exception reporting focuses on providing information regarding deviations from expected results, and master budgeting analysis involves the creation and evaluation of the company's overall budget.

Question 18

When is a cost considered to be controllable?

Accepted Answer

A cost is considered controllable if the manager has the power to incur or reduce the cost within a given time period. This means that the manager has control over the cost and can take actions to manage it. The other options (B, C, D) do not accurately define when a cost is considered controllable.

Question 19

In which situation is responsibility accounting especially valuable?

Accepted Answer

Responsibility accounting is especially valuable in decentralized companies where multiple managers have control over different segments of the company. This allows each manager to be held accountable for their own segment's performance and enables better decision-making at the individual level.

Question 20

Which one of the following decreases the controllability of a particular cost?

Accepted Answer

The answer of Which one of the following decreases the...

Quiz 11: Budgetary Control and Responsibility Accounting