budgeting is when budgets are formulated with the active.doc

_ budgeting is when budgets are formulated with the active participation of all affected employees a. financial b. team c. participative d. shared question 3 important factors considered by sales forecasters include all of the following except _. a. past pattern of sales b. marketing research studies c. competitors activities d. the desired level of sales question 4 a major drawback of using historical results for judging current performance is that _. a. past results may be incorrect b. results may refer to a different manager c. inefficiences may be concealed in the past performance d. all of these answers are correct question 5 _ is generally prepared as the first step in preparing the operating budgets. a. a sales budget b. an operating expense budget c. a purchases budget d. a budgeted income statement question 6 cheating may take the form of _.: a. making short-run decisions to increase profits that are not in the companys best long-run interests b. creating budgetary slack c. decreasing profits when actual profits are significantly exceeding the profit target d. all of these answers are correct question 7 an example of a favorable variance is _. a. actual revenues are less than expected b. actual expenses are less than expected c. material prices are greater than expected d. expected labor costs are less than actual costs question 8 differences between the static budget and the flexible budget are due to _. a. problems of cost control b. poor usage of material and labor c. a combination of price and material variances d. actual activity differing from expected activity levels question 9 the type of budget that serves as the original benchmark for evaluating performance is called a _ budget. a. balanced b. cost c. flexible d. static question 10 activity-level variances plus flexible-budget variances equals _. a. total static-budget variances b. total standard variances c. total actual variances d. none of these answers is correct question 11 efficiency is indicated by _. a. sales-activity variances b. static-budget variances c. flexible-budget variances d. all of these answers are correct question 12 effectiveness is indicated by _. a. sales-activity variances b. static-budget variances c. flexible-budget variances d. all of these answers are correct question 13 green company planned to produce 12,000 units. processing required 16,000 machine hours at a cost of $15,000 + $10.50 per machine hour. actual sales were 14,000 units requiring 20,000 machine hours. actual processing cost was $222,000. _ is the static-budget variance for processing. a. $39,000 favorable b. $39,000 unfavorable c. $42,000 favorable d. $42,000 unfavorable $222,000 $15,000 + (16,000 x $10.50) = $39,000 (u)question 14 roger company planned to produce 12,000 units. processing required 16,000 machine hours at a cost of $15,000 + $10.50 per machine hour. actual sales were 14,000 units requiring 20,000 machine hours. actual processing cost was $222,000. _ is the activity-level variance for processing. a. $39,000 favorable b. $39,000 unfavorable c. $42,000 favorable d. $42,000 unfavorable (20,000 x $10.50) + $15,000 (16,000 x $10.50) + $15,000 = $42,000 (u)question 15 identify which statement below would not be a possible reason for a variance between a flexible budget and actual results. a. material prices were different than expected b. labor prices were different than expected c. the actual volume of activity was different than expected d. the amount of labor used per unit of output was different than expected question 16 flexible budgets help to measure the _. a. differences between projected and actual activity levels b. efficiency of operations at the actual activity level c. amount by which standard quantity and expected prices differ d. reasons why projected activity levels were not attained question 17 a standard cost is a unit cost that _. a. should never be revised b. is the average cost for the industry c. the company attained for the most recently completed period d. should be attained question 18 the following information is for brooklyn corporation: direct material standard price per unit of input $29 actual price per unit of input $27 standard inputs allowed per unit of output 3 pounds actual units of input used 9,000 pounds actual units of output 3,000 units * direct material is measured in pounds _ is the direct-material price variance. a. $6,000 favorable b. $6,000 unfavorable c. $18,000 unfavorable d. $18,000 favorable 9,000 x ($29 - $27) = $18,000 (f)question 19 the following information is for euclid corporation: direct material standard price per unit of input $25 actual price per unit of input $24 standard inputs allowed per unit of output 3 pounds actual units of input used 8,300 pounds actual units of output 2,770 units * direct material is measured in pounds _ is the direct-material quantity (usage) variance. a. $250 unfavorable b. $250 favorable c. $8,300 unfavorable d. $8,300 favorable 8, 300 (2,770 x 3) x $25 = $250 (f)question 20 the following information is for pepper pike corporation: direct material standard price per unit of input $20 actual price per unit of input $18 standard inputs allowed per unit of output 3 pounds actual units of input used 8,300 pounds actual units of output 2,770 units * direct material is measured in pounds _ is the total direct-material flexible-budget variance. a. $16,400 unfavorable b. $16,400 favorable c. $16,800 favorable d. $16,800 unfavorable ($20 - $18) x 8,300 = $16,600 (f)(2,770 x 3) 8,300 x $20 = $200 (f)$16,600 (f) + $200 (f) = $16,800 (f)question 21 berea company produces 2,500 units. each unit was expected to require 2 labor hours at a cost of $10 per hour. total labor cost was $55,250 for 4,750 hours worked. direct labor is measured in hours. _ is the direct-labor price variance. a. $5,250 favorable b. $5,250 unfavorable c. $7,750 favorable d. $7,750 unfavorable $55,250 (4,750 x $10) = $7,750 (u)question 22 berea company produces 2,500 units. each unit was expected to require 2 labor hours at a cost of $10 per hour. total labor cost was $55,250 for 4,750 hours worked. direct labor is measured in hours. _ is the direct-labor quantity variance. a. $2,750 favorable b. $2,750 unfavorable c. $2,500 favorable d. $2,500 unfavorable 4,750 - (2,500 x 2) x $10 = $2,500 (f)question 23 berea company produces 2,500 units. each unit was expected to require 2 labor hours at a cost of $10 per hour. total labor cost was $55,250 for 4,750 hours worked. direct labor is measured in hours. _ is the total flexible-budget variance for direct labor. a. $5,250 favorable b. $5,250 unfavorable c. $7,500 favorable d. none of these answers is correct $55,250 (4,750 x $10) = $7,750 (u)4,750 - (2,500 x 2) x $10 = $2,500 (f)$7,750 (u) + $2,500 (f) = $5,250 (u)question 24 the following data for the safety company pertain to the production of 3,000 clay pigeons during july: standard variable-overhead cost was $5.00 per pound of clay. total actual variable-overhead cost was $11,340. standard variable-overhead cost allowed for units produced was $12,000. variable-overhead efficiency variance was $340 unfavorable. _ is the variable-overhead rate variance. a. $560 unfavorable b. $800 favorable c. $800 unfavorable d. $1,000 favorable ($12,000 + $340) - $11,340 = $1,000 (f)question 25 the following data for the fragile company pertain to the production of 1,000 bottles during july: standard variable-overhead cost: $26.00 per pound of glass. total actual variable-overhead cost: $25,000. standard variable-overhead cost allowed for units produced was $26,000. variable-overhead efficiency variance was $540 unfavorable. _ is the variable-overhead flexible-budget variance. a. $1,000 favorable b. $540 unfavorable c. $2,280 favorable d. $1,000 unfavorable $26,000 - $25,000 = $1,000 (f)question 26 to achieve maximum benefits at minimum cost, a management control system must foster _. a. goal congruence and employee motivation b. motivation and responsibility accounting c. responsibility accounting and managerial effort d. managerial effort and goal congruence question 27 the following information is available for paperback inc. and its two divisions, books and periodicals: company books periodicals as a whole division division net sales $100,000 $60,000 $40,000 fixed costs: controllable by division manager 26,500 22,500 4,000 controllable by others 18,000 15,000 3,000 variable costs: cost of merchandise sold 24,500 17,500 7,000 operating expenses 16,400 10,000 6,400 unallocated costs 7,000 _ is the contribution margin for the books division. a. $32,500 b. $42,500 c. $20,000 d. $15,000 $60,000 - $17,500 - $10,000 =$32,500question 28 the following information is available for writers inc. and its two divisions, pen and ink: company pen ink as a whole division division net sales $100,000 $50,000 $50,000 fixed costs: controllable by division manager 16,500 12,500 4,000 controllable by others 8,000 5,000 3,000 variable costs: cost of merchandise sold 24,500 17,500 7,000 operating expenses 16,400 10,000 6,400 unallocated costs 1,000 _ is the contribution controllable by the manager of the ink division. a. $29,600 b. $36,600 c. $36,000 d. $32,600 $50,000 - $7,000 - $6,400 - $4,000 = $32,600question 29 the following information is available for sandwich inc. and its two divisions, ham and cheese: company ham cheese as a whole division division net sales $100,000 $60,000 $40,000 fixed costs: controllable by division manager 16,500 12,500 4,000 controllable by others 8,000 5,000 3,000 variable costs: cost of merchandise sold 24,500 17,500 7,000 operating expenses 16,400 10,000 6,400 unallocated costs 8,000 _ is the contribution by segment for the ham division. a. $32,500 b. $20,000 c. $15,000 d. $42,500 $60,000 - $17,500 - $10,000 - $12,500 - $5,000 = $15,000question 30 the following information is available for cartoon inc. and its two divisions, spiderman and superman: company spiderman superman as a whole division division net sales $100,000 $60,000 $40,000 fixed costs: controllable by division manager 16,500 12,500 4,000 controllable by others 8,000 5,000 3,000 variable costs: cost of merchandise sold 24,500 17,500 7,000 operating expenses 16,400 10,000 6,400 unallocated costs 1,000 _ is the net income for the cartoon inc. a. $29,600 b. $34,600 c. $15,000 d. $33,600 $100,000 - $16,500 - $8,000 - $24,500 - $16,400 - $1,000 = $33,600question 31 improvements in the production process are examples of _ cost. a. prevention b. internal failure c. appraisal d. external failure question 32 groucho corporation and harpo company are movie companies. comparative data for 20x4 and 20x5 are given below. groucho harpo corporation company sales revenue 20x4 $8,400,000 $4,400,000 20x5 9,600,000 6,200,000 number of employees 20x4 8,000 5,500 20x5 9,000 7,000 assume that each 20x4 dollar is equivalent to 1.30 of the 20x5 dollars, due to inflation. _ is harpo companys 20x4 revenue per employee in terms of 20x5 dollars. a. $1,040.00 b. $885.71 c. $1,328.57 d. $800.00 ($4,400,000 / 5,500) x 1.30 = $1,040question 33 rework costs are a form of _cost. a. prevention b. appraisal c. internal failure d. external failure question 34 _ costs would not be appraisal costs. a. inspection b. testing c. warranty d. product quality audit question 35 identify which of the following statements is a benefit of decentralization. a. top-level managers have the best information concerning local conditions. b. managers acquire decision-making ability and other management skills that help them mover upward in the organization, assuring continuity of leadership. c. managers save time dealing with managers from other segments regarding transfer pricing. d. managers make decisions that enhance their segments performance. question 36 save jewel companys revenues are $300 and invested capital is $240. expenses are currently 60% of sales. jewel companys current return on investment is a. 50 % b. 100 % c. 80 % d. none of these answers is correct $300 x (100% - 60%) / $240 = 50%question 37 save kitchen companys revenues are $300 on invested capital of $240. expenses are currently 70% of sales. if kitchen company can reduce its invested capital by 20%, return on investment will be _. a. 75% b. 93.75% c. 18.75% d. 46.88% $300 x (100% - 70%) / $240 x (100% - 20%) = 46.88%question 38 save trevor company paid $8 million cash for research and development. eva invested capital was computed as $20 million. trevor company cost of capital was 20%. to add economic value to the firm, trevor company must generate revenues less operating costs of at least _. a. $4.2 million b. $9.2 million c. $12 million d. $28 million $8 million + ($20 million x 20%) = $12 millionquestion 39 save the following information is available for the super company: sales $1,000,000 invested capital 312,500 roi 20% the net income is _. a. $687,000 b. $312,500 c. $62,500 d. $100,000 20% = y / $312,500, and $312,500 x 20% = y, and y = $62,500 = net incomequestion 40 economic profit is defined as _. a. net income less a capital charge b. sales less expenses c. income divided by revenue d. the same as roi question 41 the joint formulation by a manager and his or her superior of a set of goals and plans for achieving the goals for a forthcoming period is known as _. a. capital budgeting b. managerial effort c. management by opinion d. management by objectives question 42 the following information pertains to mary company: total assets $50,000 total current liabilities 30,000 total expenses 60,000 total liabilities 35,000 total revenues 80,000 if invested capital is defined as total assets, and their cost of capital is 10%, the economic profit (residual income) is _. a. $4,000 b. $15,000 c. $20,000 d. $1,600 ($80,000 - $60,000) - (10% x $50,000) = $15,000question 43 identify which of the following statements about cost centers and decentralization is true. a. accountability for revenues and expenses exitst independently of the ability to make decisions. b. accountability for revenues and expenses requires the ability to make decisions. c. decentralized organizations are organized into profit centers. d. cost centers are centralized, but profit centers are decentralized. question 44 the following information pertains to moore company: total assets $150,000 total current liabilities 110,000 total expenses 160,000 total liabilities 115,000 total revenues 180,000 if invested capital is defined as total assets, a project earning an roi of 12% should be _. a. accepted b. rejected c. rejected if the cost of capital is greater than 12% d. rejected if the desired rate of return is less than 12% question 45 the following information pertains to robert company: total assets $50,000 total current liabilities 10,000 total expenses 60,000 total liabilities 15,000 total revenues 80,000 if invested capital is defined as total assets minus current liabilities, the economic profit (residual income) at an imputed interest rate of 20% is _. a. $12,000 b. $20,000 c. $4,000 d. $2,600 ($80,000 - $60,000) 20% x ($50,000 - $10,000) = $12,000question 46 save transfer prices are _. a. costs of the segment producing the product or service b. revenues of the segment acquiring the product or service c. revenues of the segment producing the product or service d. none of these answers is correct question 47 save lou company records reveal the following: division x market price of finished component to outsiders $32 variable costs per component 24 contribution margin per component $8 total contribution for 20,000 components $160,000 division y sales price of finished product $42 variable costs: division x (1 component $24) $24 division y assembly $9 packaging 4 13 - 37 contribution margin per unit $5 total contribution for 20,000 units $100,000 the variable costs of division y will be incurred whether it buys from division x or from an outside supplier. if division x wants to transfer the components to division y for $34 each, the manager of division y would _. a. not want to buy from division x, as the same component could be purchased at the market price of $32 b. buy from division x, as this would be in the best interest of the company as a whole c. buy from division x as long as division x could supply a large enough quantity to make it profitable to division y d. probably ask division xs manager to split the difference between the $34 and the market price of $32 to arrive at a transfer price of $36 question 48 save frances company records reveal the following: division x market price of finished component to outsiders $32 variable costs per component 24 contribution margin per component $8 total contribution for 20,000 components $160,000 division y sales price of finished product $45 variable costs: division x (1 component $24) $24 division y assembly $9 packaging 4 13 - 37 contribution margin per unit $5 total contribution for 20,000 units $100,000 the variable costs of division y will be incurred whether it buys from division x or from an outside supplier. if division x is no