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Exam 11: Budgetary Control and Responsibility Accounting

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Question 71

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What would you expect to find in a performance report for a cost centre?

A) both controllable and non-controllable costs
B) variable, but not fixed costs
C) only costs controllable by the managers of the centre
D) only material and labour costs

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Question 72

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Increasing either controllable margin or the average operating assets can raise ROI.

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Question 73

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Which one of the following is another name for the static budget?

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

In which situation is responsibility accounting especially valuable?

Residual income generates a dollar amount which represents the increase in value to the company beyond the cost necessary to pay for the financing of assets.

When is a static budget most appropriate in evaluating a manager's performance?

Which one of the following does NOT impact the amount of residual income?

What is a segment?

Which of the following is a true statement?

SuitCity purchased an operating asset expected to benefit the company for 10 years for a cost of $100,000 cash.The old operating asset was fully depreciated and was kept in operations.What effect will acquiring this asset have on the performance measurement of an investment centre?

Which statement is true about the activity index used in preparing the flexible budget?

EKPN Company recorded the following operating data: $\begin{array} { l r } \text { Sales } & \$ 1,250,000 \\\text { Contribution margin } & 485,000 \\\text { Total direct fixed costs } & 400,300 \\\text { Total operating assets Jan. 1, 2016 } & 750,000 \\\text { Total operating assets Dec. 31, 2016 } & 790,000 \\\text { EKPN Company's desired return } & 12 \%\end{array}$ What is EKPN Company's controllable margin?

What is the purpose of a departmental overhead cost report?

The area manager of the Steak House Restaurants is considering two possible expansion alternatives.The required investments, expected controllable margins, and the ROIs of each are as follows: $\begin{array} { l c c c } \underline{\text { Project }} &\underline{ \text { Investment }} &\underline{ \text { Controllable Margin }} &\underline{ \text { ROl }} \\\text { Winnipeg }& \$ 300,000 & \$ 100,000 & 33.33 \% \\\text { Regina } & \$ 700,000 & \$ 200,000 & 28.57 \%\end{array}$ The Steak House segment has currently $5,000,000 in invested capital and a controllable margin of $1,500,000.Which one of following projects will increase the Steak House division's ROI?

What should be the reaction of upper level managers when a difference between budgeted and actual sales exists?

Which one of the following measures is frequently used to evaluate the performance of the manager of an investment centre, but NOT profit centres?

Surf N Waves planned to sell 27,000 surfboards, however the actual number sold totalled 23,000.Which one of the following provides the best comparison of the cost data associated with the sales?

Policies regarding when a difference between actual and planned results should be investigated are generally more restrictive for controllable items than for non-controllable items.

Residual income is the income that remains after subtracting controllable costs from controllable margin.