Managerial Accounting Exam - Need it done in 1.5 hours
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in_a_master_budget.docxIn a master budget, a capital budget is used to prepare the ________.
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A. |
budgeted income statement |
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B. |
purchases and cost of goods sold budget |
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C. |
cash budget |
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D. |
sales budget |
Spending less than budgeted for maintenance costs will result in a(n) ________ variance. When actual revenues exceed budgeted revenues, this results in a(n) ________ variance.
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A. |
unfavorable; favorable |
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B. |
favorable; unfavorable |
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C. |
unfavorable; unfavorable |
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D. |
favorable; favorable |
Managers' incentives for performance are defined as the ________.
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A. |
relationship between cost and perceived benefit |
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B. |
influence of uncontrollable factors on a manager's performance |
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C. |
rewards for managerial effort and actions |
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D. |
relationship between goal congruence and managerial effort |
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When preparing a flexible budget income statement, ________ costs are constant at different levels of activity.
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A. |
step |
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B. |
contributed |
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C. |
fixed |
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D. |
variable |
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Dawes Company is contemplating whether to use MACRS depreciation or straight-line depreciation for a plant asset. The following information is available:
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MACRS |
Straight-line |
Present Value of |
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Depreciation |
Depreciation |
$1 at 12% |
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Year 1 |
$15,984 |
$12,000 |
0.8929 |
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Year 2 |
$21,360 |
$12,000 |
0.7972 |
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Year 3 |
$7,104 |
$12,000 |
0.7118 |
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Year 4 |
$3,552 |
$12,000 |
0.6355 |
Over the four years examined, how much did Dawes Company gain by using MACRS depreciation instead of straight-line depreciation for the plant asset? The tax rate is 35%. (Find the present value).
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A. |
$11,019 |
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B. |
$2,165 |
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C. |
$3,557 |
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D. |
$758 |
In the relevant range, the sales-activity variance for fixed costs is always ________.
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A. |
zero |
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B. |
greater than the flexible budget variance |
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C. |
less than the flexible budget variance |
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D. |
greater than the static budget variance |
Variances should be investigated if they ________.
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A. |
are favorable |
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B. |
are smaller than the variances in the prior period |
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C. |
exceed certain dollar amounts or percentage deviations from the budget |
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D. |
are unfavorable |
The following information is available for the Morton Company:
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Sales for year |
$1,500,000 |
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Income for year |
$60,000 |
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Average invested capital for year |
$200,000 |
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Contribution margin |
$150,000 |
What is the return on investment?
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13% |
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10% |
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30% |
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40% |
Transfer prices are ________.
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A. |
costs of the segment acquiring the transferred product |
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B. |
revenues of the segment producing the transferred product |
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C. |
revenues of the segment producing the transferred product and costs of the segment acquiring the transferred product |
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D. |
costs of the segment producing the transferred product |
If a selling segment has excess capacity, the opportunity cost of selling a product internally equals ________.
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A. |
the variable costs of producing the product |
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B. |
the variable costs plus the avoidable fixed costs of producing the product |
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C. |
the contribution margin the producing segment could have received from selling in the external market rather than the internal market |
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D. |
zero |
Elements of the planning and control process for a management control system do NOT include ________.
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A. |
measure, monitor and report |
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B. |
plan and execute |
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C. |
evaluate and reward |
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D. |
feedback and control |
Managers in profit centers are responsible for controlling ________ and ________.
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A. |
revenues; invested capital |
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B. |
revenues; costs |
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C. |
costs; invested capital |
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D. |
expenses; invested capital |
Which of the following approaches should be used to compare four investment alternatives?
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A. |
total project approach |
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B. |
payback method |
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C. |
sensitivity analysis |
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D. |
differential approach |
When preparing the budgeted income statement, which of the following is the source for the amount of Cost of Goods Sold?
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A. |
schedule of disbursements for operating expense |
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B. |
purchases and cost of goods sold budget |
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C. |
operating expense budget |
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D. |
sales budget |
Which of the following items does NOT affect the present value of the tax deduction for depreciation expense used in the net present value calculation of an investment?
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A. |
discount rate |
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B. |
tax rates |
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C. |
recovery period |
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D. |
gain on disposal of investment |
Tyler Company has the following information available for the past quarter:
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Division X |
Division Y |
Division Z |
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Sales |
$250,000 |
$420,000 |
$385,000 |
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Variable expenses |
42% |
35% |
31% |
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Fixed expenses controllable by division manager |
$26,000 |
$205,000 |
$160,000 |
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Fixed expenses controllable by others |
$10,000 |
$5,000 |
$8,000 |
Unallocated expenses for all three divisions are $16,000. What is the contribution controllable by the division manager in Division X?
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A. |
$109,000 |
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B. |
$145,000 |
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C. |
$93,000 |
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D. |
$119,000 |
Misuse of budgets can lead to incentives to cheat and lie. Cheating and lying may take the form of ________.
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A. |
decreasing profits when actual profits significantly exceed the profit target |
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B. |
all of the above |
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C. |
making short-run decisions to increase profits that are not in the company's best long-run interests |
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D. |
budgetary slack |
A grocery store manager is responsible for the operating performance of a grocery store. From the manager's point of view, which of the following is NOT a controllable cost?
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A. |
supplies in break room that include coffee, cups, donuts, cookies and stirring sticks |
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B. |
rent expense on store building |
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C. |
fee charged by pest management company to apply pesticide |
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D. |
temporary stocking staff hired to reorganize products in every aisle |
The following information pertains to the West division of Arthur Company:
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Net sales |
$ 21,500 |
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Variable Costs: |
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Cost of merchandise sold |
3,400 |
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Operating expenses |
1,800 |
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Fixed costs: |
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Controllable by segment manager |
1,100 |
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Controllable by others |
750 |
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Unallocated costs |
4,400 |
The contribution by segment is __________.
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A. |
$14,450 |
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B. |
$15,200 |
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C. |
$10,050 |
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D. |
$16,300 |
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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 ________.
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A. |
capital budgeting |
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B. |
management by objectives |
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C. |
management control system |
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D. |
managerial effort
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Division AA does not have excess capacity to produce Product XX. The division can sell Product XX for $10 per unit outside the company. Variable costs are $6 per unit. Division BB wants to purchase Product XX from Division AA to use in Product ZZ. The selling price of Product ZZ is $25 per unit and variable costs to finish the product after the transfer are $12 per unit. An outside supplier will sell Product XX for $12 per unit. What is the minimum transfer price for Division AA?
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A. |
$4 per unit |
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B. |
$6 per unit |
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C. |
$12 per unit |
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D. |
$10 per unit |
Calhoun Company has the following information available:
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Budgeted cost of direct materials at 650,000 units |
$ 812,500 |
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Budgeted cost of direct materials at 620,000 units |
$ 775,000 |
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Actual cost of direct materials at 620,000 units |
$ 572,000 |
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Actual level of output (units) |
620,000 |
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Planned level of output (units) |
650,000 |
The cost driver of product costs is units of output. What is the flexible budget variance for direct material costs?
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$203,000 Unfavorable |
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$240,500 Favorable |
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$203,000 Favorable |
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$240,500 Unfavorable |
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The balanced scorecard focuses management attention on the ________.
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A. |
measures of productivity |
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B. |
measures that decrease quality costs |
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C. |
measures that drive an organization to achieve its goals |
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D. |
measures that increase cycle time |
Hobart Company reports the following information:
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Net operating income after taxes |
$ 325,000 |
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Before-tax operating income |
$ 460,000 |
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Average invested capital |
$ 630,000 |
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After-tax cost of capital |
10% |
What is the residual income for Hobart Company?
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A. |
$262,000 |
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B. |
$567,000 |
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C. |
$397,000 |
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D. |
$46,000 |
Wetzel Company has actual fixed overhead costs of $14,500. Fixed overhead costs based on the flexible budget and the standard use of the cost driver are $14,400. Actual variable overhead costs are $14,700. Flexible budget costs for variable overhead costs are $15,000. What is the flexible-budget variance for fixed overhead costs?
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A. |
$300 Favorable |
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B. |
$300 Unfavorable |
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C. |
$100 Unfavorable |
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D. |
$100 Favorable |
Fairbanks Company is considering the following investment:
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Initial capital investment |
$350,000 |
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Estimated useful life |
3 years |
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Estimated disposal value in 3 years |
$1,200 |
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Estimated annual savings in cash operating costs (end of year) |
$160,000 |
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Minimum desired rate of return |
10% |
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Present value of ordinary annuity of $1, 3 period at 10% |
2.4869 |
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Present value of $1, 3 period at 10% |
0.7513 |
Assume straight-line depreciation is used. Ignore income taxes. The net present value of the investment is __________.
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A. |
$48,806 |
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B. |
$49,104 |
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C. |
$161,200 |
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D. |
$47,904 |
Burr Company expects to have the following sales: August = $18,000, September = $20,000, October = $14,000. Approximately 55% of sales are cash sales. Collection of credit sales are 50% in the month of the sale, 40% in the month following the sale, and 8% two months following the sale. The remaining 2% is uncollectible. __________ is the expected total collections in October.
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A. |
$7,398 |
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B. |
$15,098 |
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C. |
$14,450 |
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D. |
$7,700 |
Which of the following statements is NOT a benefit of decentralization?
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A. |
Managers in decentralized units may spend time negotiating transfer prices for goods transferred between units. |
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B. |
By delegating decision-making authority to local managers, higher-level managers free up time to deal with larger issues and fundamental strategy. |
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C. |
Lower-level managers are able to make faster and better decisions on local decisions than higher-level managers. |
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D. |
Local managers can develop management skills. |
The " break-even" cash inflow for an investment project is the point at which ________.
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A. |
the present value of the variable cost of future cash flows equals the present value of the fixed cost of future cash flows |
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B. |
the present value of the variable cost of future cash flows equals the present value of the variable cost of past cash flows |
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C. |
the total cash revenues equal total cash expenses |
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D. |
the net present value of the investment project is zero |
