BUDGETARY CONTROL AND RESPONSIBILITY ACCOUNTING mcq homework

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79. Stone Industries uses flexible budgets. At
normal capacity of 16,000 units, budgeted manufacturing overhead is: $48,000 variable and $270,000 fixed. If Stone
had actual overhead costs of $321,000 for 18,000 units produced, what is the
difference between actual and budgeted costs?

a. $3,000
unfavorable

b. $3,000
favorable

c. $9,000
unfavorable

d. $12,000
favorable

80. A company’s planned activity level for next
year is expected to be 100,000 machine hours. At this level of activity, the
company budgeted the following manufacturing overhead costs:

Variable Fixed

Indirect materials $140,000 Depreciation $60,000

Indirect labor 200,000 Taxes 10,000

Factory supplies 20,000 Supervision 50,000

A flexible budget prepared at the
80,000 machine hours level of activity would show total manufacturing overhead
costs of

a. $288,000.

b. $360,000.

c. $384,000.

d. $408,000.

81. In the Goblette Manufacturing Company,
indirect labor is budgeted for $108,000 and factory supervision is budgeted for
$36,000 at normal capacity of 160,000 direct labor hours. If 180,000 direct
labor hours are worked, flexible budget total for these costs is:

a. $144,000.

b. $162,000.

c. $157,500.

d. $148,500.

82. Chambers, Inc. uses flexible budgets. At
normal capacity of 16,000 units, budgeted manufacturing overhead is: $64,000
variable and $180,000 fixed. If Chambers had actual overhead costs of $250,000
for 18,000 units produced, what is the difference between actual and budgeted
costs?

a. $2,000 unfavorable.

b. $2,000 favorable.

c. $6,000 unfavorable.

d. $8,000 favorable.

83. A company’s planned activity level for next
year is expected to be 100,000 machine hours. At this level of activity, the
company budgeted the following manufacturing overhead costs:

Variable Fixed

Indirect materials $120,000 Depreciation $50,000

Indirect labor 160,000 Taxes 10,000

Factory supplies 20,000 Supervision 40,000

A flexible budget prepared at the
90,000 machine hours level of activity would show total manufacturing overhead
costs of

a. $270,000.

b. $360,000.

c. $370,000.

d. $300,000.

84. Kevin Jarvis Industries produced 192,000
units in 90,000 direct labor hours. Production for the period was estimated at 198,000
units and 99,000 direct labor hours. A flexible budget would compare budgeted
costs and actual costs, respectively, at

a. 96,000 hours and 99,000 hours.

b. 99,000 hours and 90,000 hours.

c. 96,000 hours and 90,000 hours.

d. 90,000 hours and 90,000 hours.

85. A company’s planned activity level for next
year is expected to be 100,000 machine hours. At this level of activity, the
company budgeted the following manufacturing overhead costs:

Variable Fixed

Indirect materials $90,000 Depreciation $37,500

Indirect labor 120,000 Taxes 7,500

Factory supplies 15,000 Supervision 30,000

A flexible budget prepared at the
90,000 machine hours level of activity would show total manufacturing overhead
costs of

a. $202,500.

b. $270,000.

c. $277,500.

d. $225,000.

86. Kathleen Corp. produced 320,000 units in 150,000
direct labor hours. Production for the period was estimated at 330,000 units
and 165,000 direct labor hours. A flexible budget would compare budgeted costs
and actual costs, respectively, at

a. 160,000 hours and 165,000 hours.

b. 165,000 hours and 150,000 hours.

c. 160,000 hours and 150,000 hours.

d. 150,000 hours and 150,000 hours.

\

87. At zero direct labor hours in a flexible
budget graph, the total budgeted cost line intersects the vertical axis at $30,000.
At 15,000 direct labor hours, a horizontal line drawn from the total budgeted
cost line intersects the vertical axis at $90,000. Fixed and variable costs may
be expressed as:

a. $30,000 fixed plus $4 per direct labor hour
variable.

b. $30,000 fixed plus $6 per direct labor hour
variable.

c. $60,000 fixed plus $2 per direct labor hour
variable.

d. $60,000 fixed plus $4 per direct labor hour
variable.

88. At 18,000 direct labor hours, the flexible
budget for indirect materials is $36,000. If $37,400 are incurred at 18,400
direct labor hours, the flexible budget report should show the following
difference for indirect materials:

a. $1,400 unfavorable.

b. $1,400 favorable.

c. $600 favorable.

d. $600 unfavorable.

89. The accumulation of accounting data on the
basis of the individual manager who has the authority to make day-to-day
decisions about activities in an area is called

a. static reporting.

b. flexible accounting.

c. responsibility accounting.

d. master budgeting.

90. Power Manufacturing
recorded operating data for its shoe division for the year.

Sales $1,500,000

Contribution margin 300,000

Controllable fixed costs 180,000

Average total operating assets 600,000

How much is controllable margin for the year?

a. 20%

b. 50%

c. $300,000

d. $120,000

91. A cost is considered controllable at a
given level of managerial responsibility if

a. the manager has the power to incur the cost
within a given time period.

b. the cost has not exceeded the budget amount
in the master budget.

c. it is a variable cost, but it is
uncontrollable if it is a fixed cost.

d. it changes in magnitude in a flexible budget.

92. As one moves up to each higher level of
managerial responsibility,

a. fewer costs are controllable.

b. the responsibility for cost incurrence
diminishes.

c. a greater number of costs are controllable.

d. performance evaluation becomes less
important.

93. A responsibility report should

a. be prepared in accordance with generally
accepted accounting principles.

b. show only those costs that a manager can
control.

c. only show variable costs.

d. only be prepared at the highest level of
managerial responsibility.

94. Top management can control

a. only controllable costs.

b. only noncontrollable costs.

c. all costs.

d. some noncontrollable costs and all
controllable costs.

95. Not-for-profit entities

a. do not use responsibility accounting.

b. utilize responsibility accounting in trying
to maximize net income.

c. utilize responsibility accounting in trying
to minimize the cost of providing services.

d. have only noncontrollable costs.

96. Which of the following is not a true statement?

a. All costs are controllable at some level
within a company.

b. Responsibility accounting applies to both
profit and not-for-profit entities.

c. Fewer costs are controllable as one moves up
to each higher level of managerial responsibility.

d. The term segment
is sometimes used to identify areas of responsibility in decentralized
operations.

97. Costs incurred indirectly and allocated to
a responsibility level are considered to be

a. nonmaterial.

b. mixed.

c. controllable.

d. noncontrollable.

98. Management by exception

a. is most effective at top levels of
management.

b. can be implemented at each level of
responsibility within an organization.

c. can only be applied when comparing actual
results with the master budget.

d. is the opposite of goal congruence.

99. Which responsibility
centers generate both revenues and costs?

a. Investment
and profit centers

b. Profit
and cost centers

c. Cost
and investment centers

d. Only profit centers

100. The linens department of a large department
store is

a. not a responsibility center.

b. a profit center.

c. a cost center.

d. an investment center.

101. The foreign subsidiary of a large
corporation is

a. not a responsibility center.

b. a profit center.

c. a cost center.

d. an investment center.

102. The maintenance department of a manufacturing
company is a(n)

a. segment.

b. profit center.

c. cost center.

d. investment center.

103. Which of the following is not a correct match?

1. Incurs
costs

2. Generates
revenue

3. Controls
investment funds

a. Investment Center 1, 2, 3

b. Cost Center 1

c. Profit Center 1, 2, 3

d. All are correct matches.

104. A
cost center

a. only incurs costs and does not directly
generate revenues.

b. incurs costs and generates revenues.

c. is a responsibility center of a company which
incurs losses.

d. is a responsibility center which generates
profits and evaluates the investment cost of earning the profit.

105. A manager of a cost center is evaluated
mainly on

a. the profit that the center generates.

b. his or her ability to control costs.

c. the amount of investment it takes to support
the cost center.

d. the amount of revenue that can be generated.

106. Performance
reports for cost centers compare actual

a. total costs with static budget data.

b. total costs with flexible budget data.

c. controllable costs with static budget data.

d. controllable costs with flexible budget data.

107. In the performance report for cost centers,

a. controllable and noncontrollable costs are
reported.

b. fixed costs are not reported.

c. no distinction is made between fixed and
variable costs.

d. only materials and controllable costs are
reported.

108. Of the following choices, which contain
both a traceable fixed cost and a common fixed cost?

a. Profit center manager’s salary and
timekeeping costs for a responsibility center’s employees.

b. Company president’s salary and company
personnel department costs.

c. Company personnel department costs and
timekeeping costs for a responsibility center’s employees.

d. Depreciation on a responsibility center’s
equipment and supervisory salaries for the center.

Ans: C,
LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB:
Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget
Preparation

109. Which of the following is not an indirect fixed cost?

a. Company president’s salary

b. Depreciation on the company building housing
several profit centers

c. Company personnel department costs

d. Profit center supervisory salaries

110. A
profit center is

a. a responsibility center that always reports a
profit.

b. a responsibility center that incurs costs and
generates revenues.

c. evaluated by the rate of return earned on the
investment allocated to the center.

d. referred to as a loss center when operations
do not meet the company’s objectives.

111. The best measure of the performance of the
manager of a profit center is the

a. rate of return on investment.

b. success in meeting budgeted goals for
controllable costs.

c. amount of controllable margin generated by
the profit center.

d. amount of contribution margin generated by
the profit center.

112. Controllable margin is defined as

a. sales minus variable costs.

b. sales minus contribution margin.

c. contribution margin less controllable fixed
costs.

d. contribution margin less noncontrollable
fixed costs.

113. Controllable margin is most useful for

a. external financial reporting.

b. preparing the master budget.

c. performance evaluation of profit centers.

d. break-even analysis.

114. Which of the following will not result in an unfavorable controllable
margin difference?

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 budget

115. Given below is an excerpt from a management
performance report:

Budget
Actual
Difference

Contribution margin $1,000,000 $1,050,000 $50,000

Controllable fixed costs $
500,000 $ 450,000 $50,000

The manager’s overall performance

a. is 20% below expectations.

b. is 20% above expectations.

c. is equal to expectations.

d. cannot be determined from information given.

116. Which
of the following are financial measures of performance?

1. Controllable
margin

2. Product
quality

3. Labor
productivity

a. 1

b. 2

c. 3

d. 1 and 3

117. Given below is an excerpt from a management
performance report:

Budget
Actual
Difference

Contribution margin $600,000 $580,000 $20,000 U

Controllable fixed costs $200,000 $220,000 $20,000 U

The manager’s overall performance

a. is 10% above expectations.

b. is 10% below expectations.

c. is equal to expectations.

d. cannot be determined from the information
provided.

118. A
responsibility report for a profit center will

a. not show controllable fixed costs.

b. not show indirect fixed costs.

c. show noncontrollable fixed costs.

d. not show cumulative year-to-date results.

119. The dollar amount of the controllable
margin

a. is usually higher than the contribution
margin.

b. is usually lower than the contribution
margin.

c. is always equal to the contribution margin.

d. cannot be a negative figure.

120. Pippen Co. recorded operating data for its
shoe division for the year. The company’s desired return is 5%.

Sales $1,000,000

Contribution margin 200,000

Total direct fixed costs 120,000

Average total operating assets 400,000

Which one of the following reflects the controllable margin for the
year?

a. 20%

b. 50%

c. $60,000

d. $80,000

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BUDGETARY CONTROL AND RESPONSIBILITY ACCOUNTING mcq homework

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MULTIPLE CHOICE QUESTIONS

38. What is budgetary
control?

a. Another
name for a flexible budget

b. The
degree to which the CFO controls the budget

c. The
use of budgets in controlling operations

d. The
process of providing information on budget differences to lower
level managers

39. A major element in budgetary control is

a. the preparation of long-term plans.

b. the comparison of actual results with planned
objectives.

c. the valuation of inventories.

d. approval of the budget by the stockholders.

40. Budget reports should be prepared

a. daily.

b. monthly.

c. weekly.

d. as frequently as needed.

41. On the basis of the budget reports,

a. management analyzes differences between
actual and planned results.

b. management may take corrective action.

c. management may modify the future plans.

d. All of these.

42. The purpose of the departmental overhead
cost report is to

a. control indirect labor costs.

b. control selling expense.

c. determine the efficient use of materials.

d. control overhead costs.

43. The purpose of the sales budget report is
to

a. control selling expenses.

b. determine whether income objectives are being
met.

c. determine whether sales goals are being met.

d. control sales commissions.

44. The comparison of differences between
actual and planned results

a. is done by the external auditors.

b. appears on the company’s external financial
statements.

c. is usually done orally in departmental
meetings.

d. appears on periodic budget reports.

45. A static budget

a. should not be prepared in a company.

b. is useful in evaluating a manager’s
performance by comparing actual variable costs and planned variable costs.

c. shows planned results at the original
budgeted activity level.

d. is changed only if the actual level of
activity is different than originally budgeted.

46. A static budget report

a. shows costs at only 2 or 3 different levels
of activity.

b. is appropriate in evaluating a manager’s
effectiveness in controlling variable costs.

c. should be used when the actual level of
activity is materially different from the master budget activity level.

d. may be appropriate in evaluating a manager’s
effectiveness in controlling costs when the behavior of the costs in response
to changes in activity is fixed.

47. A static budget is appropriate in
evaluating a manager’s performance if

a. actual activity closely approximates the
master budget activity.

b. actual activity is less than the master
budget activity.

c. the company prepares reports on an annual
basis.

d. the company is a not-for-profit organization.

48. When budgeted and actual results are not
the same amount, there is a budget

a. error.

b. difference.

c. anomaly.

d. by-product.

49. Top management’s
reaction to a difference between budgeted and actual sales often depends on

a. whether the difference is favorable or
unfavorable.

b. whether management anticipated the
difference.

c. the materiality of the difference.

d. the personality of the top managers.

50. If costs are not
responsive to changes in activity level, then these costs can be best described
as

a. mixed.

b. flexible.

c. variable.

d. fixed.

51. Assume that actual sales results exceed the
planned results for the second quarter. This favorable difference is greater
than the unfavorable difference reported for the first quarter sales. Which of
the following statements about the sales budget report on June 30 is true?

a. The year-to-date results will show a
favorable difference.

b. The year-to-date results will show an
unfavorable difference.

c. The difference for the first quarter can be
ignored.

d. The sales report is not useful if it shows a
favorable and unfavorable difference for the two quarters.

52. A static budget is appropriate for

a. variable overhead costs.

b. direct materials costs.

c. fixed overhead costs.

d. None of these.

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

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 alllevels of
management.

d. The
static budget is prepared only for units produced, while a
flexible budget reflects the number of units sold.

54. Another name for the static budget is

a. master budget.

b. overhead budget.

c. permanent budget.

d. flexible budget.

55. The master budget of Windy Co. shows that
the planned activity level for next year is expected to be 50,000 machine
hours. At this level of activity, the following manufacturing overhead costs
are expected:

Indirect labor $720,000

Machine supplies 180,000

Indirect materials 210,000

Depreciation on factory building 150,000

Total manufacturing overhead $1,260,000

A flexible budget for a level of activity of 60,000 machine hours
would show total manufacturing overhead costs of

a. $1,482,000.

b. $1,260,000.

c. $1,512,000.

d. $1,362,000.

56. Boland
Manufacturing prepared a 2013 budget for 120,000 units of product. Actual
production in 2013 was 130,000 units. To be most useful, what amounts should a
performance report for this company compare?

a. The
actual results for 130,000 units with the original budget for 120,000 units.

b. The
actual results for 130,000 units with a new budget for 130,000units.

c. The
actual results for 130,000 units with last year’s actualresults
for 134,000 units.

d. It doesn’t matter. All of
these choices are equally useful.

57. A department has budgeted monthly
manufacturing overhead cost of $540,000 plus $3 per direct labor hour. If a
flexible budget report reflects $1,044,000 for total budgeted manufacturing
cost for the month, the actual level of activity achieved during the month was

a. 528,000 direct labor hours.

b. 168,000 direct labor hours.

c. 348,000 direct labor hours.

d. Cannot be determined from the information
provided.

58. Which one of the following would be the
same total amount on a flexible budget and a static budget if the activity
level is different for the two types of budgets?

a. Direct materials cost

b. Direct labor cost

c. Variable manufacturing overhead

d. Fixed manufacturing overhead

59. In developing a flexible budget within a
relevant range of activity,

a. only fixed costs are included.

b. it is necessary to relate variable cost data
to the activity index chosen.

c. it is necessary to prepare a budget at 1,000
unit increments.

d. variable and fixed costs are combined and are
reported as a total cost.

60. What budgeted
amounts appear on the flexible budget?

a. Original
budgeted amounts at the static budget activity level

b. Actual
costs for the budgeted activity level

c. Budgeted
amounts for the actual activity level achieved

d. Actual
costs for the estimated activity level

61. The flexible budget

a. is prepared before the master budget.

b. is relevant both within and outside the
relevant range.

c. eliminates the need for a master budget.

d. is a series of static budgets at different
levels of activity.

62. A flexible budget can be prepared for which
of the following budgets comprising the master budget?

a. Sales

b. Overhead

c. Direct materials

d. All of these.

63. A flexible budget

a. is prepared when management cannot agree on
objectives for the company.

b. projects budget data for various levels of
activity.

c. is only useful in controlling fixed costs.

d. cannot be used for evaluation purposes
because budgeted data are adjusted to reflect actual results.

64. If a company plans to sell 48,000 units of
product but sells 60,000, the most appropriate comparison of the cost data
associated with the sales will be by a budget based on

a. the original planned level of activity.

b. 54,000 units of activity.

c. 60,000 units of activity.

d. 48,000 units of activity.

65. Within the relevant range of activity, the
behavior of total costs is assumed to be

a. linear and upward sloping.

b. linear and downward sloping.

c. curvilinear and upward sloping.

d. linear to a point and then level off.

66. Sales results that are evaluated by a
static budget might show

1. favorable
differences that are not justified.

2. unfavorable
differences that are not justified.

a. 1

b. 2

c. both 1 and 2.

d. neither 1 nor 2.

67. The selection of levels of activity to
depict a flexible budget

1. will
be within the relevant range.

2. is
largely a matter of expediency.

3. is
governed by generally accepted accounting principles.

a. 1

b. 2

c. 3

d. 1 and 2

68. Management by exception

a. causes managers to be buried under voluminous
paperwork.

b. means that all differences will be
investigated.

c. means that only unfavorable differences will
be investigated.

d. means that material differences will be
investigated.

69. Under management by exception, which
differences between planned and actual results should be investigated?

a. Material and noncontrollable

b. Controllable and noncontrollable

c. Material and controllable

d. All differences should be investigated

70. Best Shingle’s
budgeted manufacturing costs for 50,000 squares of shingles are:

Fixed manufacturing costs $12,000

Variable manufacturing costs $16.00
per square

Best produced 40,000 squares of shingles during March. How much are
budgeted total manufacturing costs in March?

a. $640,000

b. $812,000

c. $800,000

d. $652,000

71. A flexible budget depicted graphically

a. is identical to a CVP graph.

b. differs from a CVP graph in the way that
fixed costs are shown.

c. differs from a CVP graph in the way that
variable costs are shown.

d. differs from a CVP graph in that sales
revenue is not shown.

72. The activity index used in preparing the
flexible budget

a. is prescribed by generally accepted
accounting principles.

b. is only applicable to fixed manufacturing
costs.

c. is the same for all departments.

d. should significantly influence the costs that
are being budgeted.

73. A static budget is not appropriate in
evaluating a manager’s effectiveness if a company has

a. substantial fixed costs.

b. substantial variable costs.

c. planned activity levels that match actual
activity levels.

d. no variable costs.

74. Shane Industries
prepared a fixed budget of 60,000 direct labor hours, with estimated overhead
costs of $300,000 for variable overhead and $90,000 for fixed overhead. Shane
then prepared a flexible budget at 57,000 labor hours. How much is total
overhead costs at this level of activity?

a. $285,000

b. $375,000

c. $370,500

d. $390,000

75. For June, Gold Corp.
estimated sales revenue at $600,000. It pays sales commissions that are 4% of
sales. The sales manager’s salary is $285,000, estimated shipping expenses
total 1% of sales, and miscellaneous selling expenses are $15,000. How much are
budgeted selling expenses for the month of July if sales are expected to be $540,000?

a. $42,000

b. $327,000

c. $27,000

d. $330,000

76. Nikoto Steel Co. budgeted manufacturing
costs for 50,000 tons of steel are:

Fixed manufacturing costs $50,000 per month

Variable manufacturing costs $12.00 per ton of steel

Nikoto produced 40,000 tons of steel
during March. How much is the flexible budget for total manufacturing costs for
March?

a. $520,000

b. $650,000

c. $480,000

d. $530,000

77. 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?

a. $640,000

b. $824,000

c. $800,000

d. $664,000

78. In
the Dichter Co., indirect labor is budgeted for $72,000 and factory supervision
is budgeted for $24,000 at normal capacity of 160,000 direct labor hours. If 180,000
direct labor hours are worked, flexible budget total for these costs is

a. $96,000.

b. $108,000.

c. $105,000.

d. $99,000.

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