Question Details

1. The unit sales budget affects many of the other schedules
comprising the master budget (i.e. will affect the production, direct
materials, and direct labor budgets). a. True b. False 2. Which of the following is not a characteristic of
bottom-up budgeting? a. Encourages organization-wide input into the process. b. Takes advantage of employees’ intimate knowledge of
operations when formulating plans. c. Is not as time consuming as top-down budgeting. d. Increases employees’ commitment to achieving budget
goals. e. All of the above are characteristics of bottom-up
budgeting. 3. Which of the
following is a concern of using prior performance as the starting point for
developing budgets? a. This approach can foster a business-as-usual mentality. b. This approach may blind decision makers to the need for
drastic changes in business by making them focus narrowly on small changes from
the status quo. c. Both A and B are concerns. d. Neither A or B are concerns 4. Which of the following transfer prices, in theory, is the
most sound because it provides the best measure of the opportunity cost of
inter-divisional transfers? a. Variable cost-based transfer prices. b. Full cost-based transfer prices. c. Market-based transfer prices. d. Negotiated transfer prices. e. None of the above. 5. The minimum price that the selling division wants from an
inter-company transfer is: a. The cost of the transfer plus the opportunity cost of the
transfer. b. The cost of the transfer less the opportunity cost of the
transfer. c. The normal selling price of the item plus the opportunity
cost of the transfer. d. The normal selling price of the item less the opportunity
cost of the transfer. 6. The benefits of decentralization include all of the
following except: A. It forces top levels of management to focus on individual
units. B. It empowers more employees at lower levels of management.
C. It allows for better and more timely decision making. D. It trains future managers. 7. Agency problems arise in the case of decentralization
related to: A. The fact that local managers have private information. B. The fact that senior management cannot observe local
manager effort (i.e., “hidden action”). C. Both A. and B. D. Neither A. or B. 8. A “noisier” performance measure places less risk on the
employee being evaluated using the performance measure. A. True B. False Sweet Marian is a bakery that provides frozen cakes to
retail grocery stores. Sweet Marian produces numerous types of cakes and
charges $4.50 per cake, including delivery and regardless of the type of cake.
A specialty cake line, “Marian’s Moist,” has been gaining popularity lately
because these cakes are so moist they “melt in your mouth.” Sweet Marian’s
accounting system computes the cost of cakes by summing the total of all raw
materials, direct labor costs and overhead incurred each week and dividing it
by the number of cakes produced. SG&A costs are reported in total whenever
GAAP financial statements are prepared at the end of a month, quarter, or
year. Sweet Marian’s profit
has been decreasing lately. The company has hired you as a consultant to help
it determine how to stop their declining profits. You have toured the bakery
and noticed the following: a) The Marian’s Moist
line of cakes require a quick-freeze process to maintain their moisture. The
quick freeze process requires using special equipment that must be precisely
calibrated and charged with gasses before each batch of cakes is run through
the system. b) Some cakes require extensive hand decorating whereas most
require simple icing. c) Sweet Marian has recently landed a new upscale food chain
as a customer. In order to entice the customer, Sweet Marian agreed to stock
the cakes on the customer’s display cases in each store as part of the delivery
service. For other customers Sweet Marian only delivers the cakes to the
customer’s warehouse. BRIEFLY provide an overall critique (in bullet point format)
of the current costing system and how this may relate to the declining profits.
BRIEFLY describe recommendations and/or any changes you
would make to the accounting system for each of the items noted above (i.e.,
your answers below should correspond with the items labeled a, b, and c in the
problem): a) b) c)





















































































































































You are a division manager at Caddo Co. Below is your
division’s income statement and other information for the current year:Compute the ROA and RI for your division: ROA ___________ RI ____________You are considering an investment that will generate annual
returns of 10%; assume that it is generally risk free. Based on your answers
for ROA and RI above, answer the following two questions. 1. Would a 100% self-interested manager choose to invest in
this project if they are paid incentives based on ROA? Circle one below. YES NO 2. Would a 100% self-interested manager choose to invest in
this project if they are paid incentives based on RI? Circle one below. YES NO Prepare an income statement in the space below for your
division using the contribution margin format.
For purposes of this question, assume that all costs shown
on the income statement (that you just prepared on the previous page) can be
directly traced to your division (i.e., there are no corporate-level
allocations). A. Compute the breakeven point in total $ of revenues. BEP in total $ of revenues ______________ B. If revenues
increased by $10,000 from your answer in part A, how much would your profits
increase? Profit increase $ ______________















































































Gamon Memorial Diner is a charity supported by donations
that provides free meals to the homeless.
The diner’s manager has just submitted the report presented below, which
compares the diner’s budget for February to the actual costs for February. The
diner’s manager was very happy about the results because total actual costs
were less than budgeted.Prepare a flexible budget for the diner in the space
provided above.As a highly trained MBA, do you share the joy of the diner’s
manager? (circle yes or no below) YES NOWhich two flexible budget variances would you
investigate? Name the expense and
BRIEFLY state why it would be important to investigate. 1. 2Macon Paper Co (MPC) currently manufactures commodity grade
papers for use in computer printers and photocopiers. MPC has reported losses
for the last two years due to intense pressure from much larger competitors.
The MPC management team is contemplating a change in strategy to restore
financial viability. The commodity
paper manufacturing business is all about economies of scale in which the
largest competitor with the lowest cost per unit wins. Therefore MPC has been
focused on cost reduction, with a particular focus on maintaining full capacity
utilization of its machines. However, MPC’s older machines with limited
capacity have made it difficult for them to succeed at the “crank out as many
tons of paper as possible” strategy. The new strategy would be to pursue
low-volume business opportunities that exist in non-standard, specialized paper
grades. These customers would want prompt deliveries of smaller quantities of a
full range of paper grades. MPC management believes it will be able to charge
premium prices because there is limited competition in this market. To succeed
at this new strategy, MPC would need to adjust its manufacturing in three ways:
• Improve the ability to switch between paper grades. Right
now they require an average of four hours to change over to another grade.
Prompt customer deliveries are a function of changeover performance. • Expand the range of paper grades they can manufacture.
Currently they only manufacture three grades, and they would need to expand
grade capability so as to be perceived by customers as a “one stop shop.” This
would require new supply chain relationships and production worker training. • Improve their yields (i.e., tons of acceptable output
relative to total tons produced) in the nonstandard papers. Currently, the
percentage of waste within the non-standard grades is unacceptably high. 1. Generally speaking, why would a company need to change
its performance measurement system when it changes its strategy? 



















































2 Provide two
examples of measures that would be appropriate under the new strategy. Why
would these measures support MPC’s new strategy?