Question :
PART I — MULTIPLE CHOICE (26 points)
Instructions: Designate the best : 1311541
PART I — MULTIPLE CHOICE (26 points)
Instructions: Designate the best answer for each of the following questions.
1. Office Stuff produced 15,000 file cabinets at a cost of $80,000. Production for the period was estimated at 14,000 file cabinets at a cost of $75,000. On which of the following should the flexible budget be based?
a. Budgeted costs of actual production
b. Budgeted costs of budgeted production
c. Actual costs of budgeted production
d. Actual costs of actual production
2. Which of the following is true with regard to budgeting vs. long-range planning?
a. Both tend to be very detailed.
b. They are the same in all significant aspects.
c. The maximum length for both usually is a year, with shorter periods of time also common.
d. Budgeting is oriented more toward short-term goals; long-range planning toward long-term goals.
3. Which of the following is false with regard to budgetary planning?
a. The starting point for the budgets of a not-for-profit organization is generally receipts, rather than expenditures.
b. A merchandising company uses a purchases budget instead of a production budget.
c. Budgets may be used by manufacturing companies, merchandising companies, service enterprises, and not-for-profit organizations.
d. For a service enterprise, the critical factor in budgeting is coordinating professional staff needs with anticipated services.
4. The manager of an investment center can improve ROI by
a. reducing variable and/or controllable fixed costs.
b. reducing average operating assets.
c. increasing sales.
d. all of the above.
5. Which of the following is true with regard to budgetary planning?
a. Generally accepted accounting principles require the budgets be prepared at least annually.
b. The cash budget is often considered to be the most important output in preparing financial budgets.
c. The likelihood of a realistic budget is greater when the budget is developed from top management down to lower management.
d. The human behavior aspects of budgeting, while they should not be ignored, are generally of little real significance.
6. A static budget is
a. applicable to cost budgets but not to a sales budget.
b. modified or adjusted for changes in activity during the year.
c. appropriate in evaluating a manager’s effectiveness in controlling fixed costs.
d. appropriate in evaluating a manager’s effectiveness in controlling variable costs.
7. When considering controllable versus noncontrollable costs,
a. costs allocated to, and thus identifiable with, a particular responsibility level are controllable.
b. costs incurred directly by a level of responsibility are controllable at that level.
c. controllable cost and noncontrollable cost, respectively, are synonymous with variable cost and fixed cost.
d. more costs are controllable as one moves down to the lower levels where actual production takes place.
8. A responsibility report for a profit center shows
a. gross profit and income from operations.
b. contribution margin and controllable margin.
c. contribution margin, controllable margin, and return on investment.
d. gross profit, income from operations, and net income.
9. A flexible budget
a. is, in essence, a series of static budgets at different levels of activity.
b. can be prepared for each of the types of budgets included in a master budget.
c. increases budget allowances both directly and proportionately for variable costs as production increases.
d. all of the above.
10. Responsibility centers are generally classified as either
a. divisions, departments, or branches.
b. segments, subunits, or subdivisions.
c. cost centers, profit centers, or divisions.
d. cost centers, profit centers, or investment centers.
11. The initial budget prepared in the master budget is the
a. sales budget.
b. production budget.
c. budgeted balance sheet.
d. budgeted income statement.
12. The ROI formula for an investment center is
a. Controllable Margin ÷ Sales.
b. Net Income ÷ Average Operating Assets.
c. Contribution Margin ÷ Average Operating Assets.
d. Controllable Margin ÷ Average Operating Assets.
13. The Florida Division of Right Enterprises had an ROI of 18% when sales were $1,500,000 and controllable margin was $118,800. What were the average operating assets?
a. $270,000
b. $21,384
c. $291,384
d. $660,000
