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Exam 24: Budgetary Control and Responsibility Accounting

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Question 91

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A major aspect of budgetary control is the use of budget reports that compare _____________________ with _______________________.

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actual res...

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Question 92

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An advantage of the return on investment ratio is that no judgmental factors are involved.

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Question 93

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

A static budget is changed only when actual activity is different from the level of activity expected.

A static budget is appropriate in evaluating a manager's performance if

The master budget of Windy Co. shows that the planned activity level for next year is expected to be 50000 machine hours. At this level of activity the following manufacturing overhead costs are expected: $\begin{array} { l r } \text { Indirect labor } & \$ 720,000 \\\text { Machine supplies } & 180,000 \\\text { Indirect materials } & 210,000 \\\text { Depreciation on factory building } & 150,000 \\\text { Total manufacturing overhead } & \$ 1,260,000\end{array}$ A flexible budget for a level of activity of 60000 machine hours would show total manufacturing overhead costs of

Return on investment is calculated by dividing _________________________ by ________________________.

Monte Inc. recorded operating data for its Sandtrap division for the year. Monte requires its return to be 9%. $\begin{array} { l r } \text { Sales } & \$ 1,000,000 \\\text { Controllable margin } & 180,000 \\\text { Total average assets } & 600,000 \\\text { Fixed costs } & 60,000\end{array}$ How much is ROI for the year?

The comparison of differences between actual and planned results

What budgeted amounts appear on the flexible budget?

Management by exception

Trails and Paths Inc. had average operating assets of $6000000 and sales of $3000000 in 2016. If the controllable margin was $600000 the ROI was

Moss Corp. reported the following items for 2016: Instructions Compute the controllable margin for 2016.

The master budget is not used in the budgetary control process.

A flexible budget is appropriate for $\begin{array} { l c c } & \text { Direct Labor Costs } & \text { Manufacturing Overhead Costs } \\\end{array}$ A) $\begin{array} { l c c } &&& \text { No } &&&&&&&&&& \text { No } \\\end{array}$ B) $\begin{array} { l c c } &&& \text { Yes } &&&&&&&&&& \text { Yes } \\\end{array}$ C) $\begin{array} { l c c } &&& \text { Yes } &&&&&&&&&& \text { No } \\\end{array}$ D) $\begin{array} { l c c } &&& \text { No } &&&&&&&&&& \text { Yes }\end{array}$

Danner Co. has three divisions which are operated as profit centers. Actual operating data for the divisions listed alphabetically are as follows. $\begin{array}{lccc}\text { Operating Data }&\text { Women's Shoes }&\text { Men's Shoes }&\text { Children's Shoes }\\\hline\text { Contribution margin } & \$ 280,000 & (3) & \$ 220,000 \\\text { Controllable fixed costs } & 130,000 & (4) & (5) \\\text { Controllable margin } & (1) & \$ 90,000 & 96,000 \\\text { Sales } & 800,000 & 480,000 & (6) \\\text { Variable costs } & (2) & 330,000 & 250,000\end{array}$ Instructions (a) Compute the missing amounts. Show computations. (b) Prepare a responsibility report for the Women's Shoe Division assuming (1) the data are for the month ended June 30 2016 and (2) all data equal budget except variable costs which are $20000 over budget.

Management by exception

Naples Inc. recorded operating data for its shoe division for the year. $\begin{array} { l r } \text { Sales } & \$ 750,000 \\\text { Contribution margin } & 135,000 \\\text { Total fixed costs } & 90,000 \\\text { Average total operating assets } & 300,000\end{array}$ How much is ROI for the year if management is able to identify a way to improve the contribution margin by $30000 assuming fixed costs are held constant?

If actual results are different from planned results the difference must always be investigated by management to achieve effective budgetary control.

A flexible budget depicted graphically