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Exam 23: Budgetary Control and Responsibility Accounting

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Question 41

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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%.

E) B) and D)
F) B) and C)

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Question 42

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Webb, Inc. uses a flexible budget for manufacturing overhead based on machine hours. Variable manufacturing overhead costs per machine hour are as follows: The company believes it will normally operate in a range of 4,000 to 8,000 machine hours per month. During the month of August, 2016, the company incurs the following manufacturing overhead costs: Instructions Prepare a flexible budget report, assuming that the company used 6,000 machine hours during August.

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Question 43

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A static budget is most useful for evaluating a manager's performance in controlling variable costs.

The foreign subsidiary of a large corporation is

Given below is an excerpt from a management performance report: The manager's overall performance

In general, costs ____________________ directly by the level of responsibility are _______________, whereas costs that are ____________________ to the responsibility level are __________________.

Pippen Co. recorded operating data for its shoe division for the year. The company's desired return is 5%. Which one of the following reflects the controllable margin for the year?

Which of the following is not a correct match? 1) Incurs costs 2) Generates revenue 3) Controls investment funds

The flexible budget

Return on investment is calculated by dividing

Smart Manufacturing budgeted costs for 50,000 linear feet of block are: Fixed manufacturing costs $24,000 per month Variable manufacturing costs $16.00 per linear foot Smart installed 40,000 linear feet of block during March. How much is budgeted total manufacturing costs in March?

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

Controllable margin is most useful for

Lapp Manufacturing uses flexible budgets to control its selling expenses. Monthly sales are expected to be from $400,000 to $480,000. Variable costs and their percentage relationships to sales are: Fixed selling expenses consist of sales salaries $80,000 and depreciation on delivery equipment $20,000. Instructions Prepare a flexible budget for increments of $40,000 of sales within the relevant range.

The Medford Burkett Company uses a responsibility reporting system to measure the performance of its three investment centers: Planes, Taxis, and Limos. Segment performance is measured using a system of responsibility reports and return on investment calculations. The allocation of resources within the company and the segment managers' bonuses are based in part on the results shown in these reports. Recently, the company was the victim of a computer virus that deleted portions of the company's accounting records. This was discovered when the current period's responsibility reports were being prepared. The printout of the actual operating results appeared as follows. Instructions Determine the missing pieces of information above.

Total ________________ costs will be the same on the master budget and on a flexible budget which reflects the actual level of activity.

Responsibility centers may be classified into three types: (1)____________________, (2)___________________ and, (3)____________________.

The terms "direct fixed costs" and "indirect fixed costs" are synonymous with "traceable costs" and "common costs," respectively.

The purpose of the departmental overhead cost report is to

Which of the following would not be considered an aspect of budgetary control?