Question Details

 Accounting 101 PART 2 BUDGETARY CONTROL AND
RESPONSIBILITY ACCOUNTING


MULTIPLE CHOICE QUESTIONS
	31.	A major element in budgetary control is
		a.	the preparation of long-term plans.
		b.	the comparison of actual results with planned objectives.
		c.	the valuation of inventories.
		d.	approval of the budget by the stockholders.

	32.	Budget reports should be prepared
		a.	daily.
		b.	monthly.
		c.	weekly.
		d.	as frequently as needed.

	33.	On the basis of the budget reports,
		a.	management analyzes differences between actual and planned results.
		b.	management may take corrective action.
		c.	management may modify the future plans.
		d.	all of these.

	34.	The purpose of the departmental overhead cost report is to
		a.	control indirect labor costs.
		b.	control selling expense.
		c.	determine the efficient use of materials.
		d.	control overhead costs.

	35.	The purpose of the sales budget report is to
		a.	control selling expenses.
		b.	determine whether income objectives are being met.
		c.	determine whether sales goals are being met.
		d.	control sales commissions.

	36.	The comparison of differences between actual and planned results
		a.	is done by the external auditors.
		b.	appears on the company's external financial statements.
		c.	is usually done orally in departmental meetings.
		d.	appears on periodic budget reports.

	37.	A static budget
		a.	should not be prepared in a company.
	b.	is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs.
		c.	shows planned results at the original budgeted activity level.
		d.	is changed only if the actual level of activity is different than originally budgeted.

	38.	A static budget report
		a.	shows costs at only 2 or 3 different levels of activity.
		b.	is appropriate in evaluating a manager's effectiveness in controlling variable costs.
	c.	should be used when the actual level of activity is materially different from the master budget activity level.
	d.	may be appropriate in evaluating a manager's effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.
	39.	A static budget is appropriate in evaluating a manager's performance if
		a.	actual activity closely approximates the master budget activity.
		b.	actual activity is less than the master budget activity.
		c.	the company prepares reports on an annual basis.
		d.	the company is a not-for-profit organization

	40.	When budgeted and actual results are not the same amount, there is a budget
		a.	error.
		b.	difference.
		c.	anomaly.
		d.	by-product.

	41.	Top management's reaction to a difference between budgeted and actual sales often depends on
		a.	whether the difference is favorable or unfavorable.
		b.	whether management anticipated the difference.
		c.	the materiality of the difference.
		d.	the personality of the top managers.

	42.	If costs are not responsive to changes in activity level, then these costs can be best described as
		a.	mixed.
		b.	flexible.
		c.	variable.
		d.	fixed.

	43.	Assume that actual sales results exceed the planned results for the second quarter.  This favorable difference is greater than the unfavorable difference reported for the first quarter sales.  Which of the following statements about the sales budget report on June 30 is true?
		a.	The year-to-date results will show a favorable difference.
		b.	The year-to-date results will show an unfavorable difference.
		c.	The difference for the first quarter can be ignored.
	d.	The sales report is not useful if it shows a favorable and unfavorable difference for the two quarters.

	44.	A static budget is appropriate for
		a.	variable overhead costs.
		b.	direct material costs.
		c.	fixed overhead costs.
		d.	none of these.

	45.	A flexible budget
		a.	is prepared when management can't agree on objectives for the company.
		b.	projects budget data for various levels of activity.
		c.	is only useful in controlling fixed costs.
	d.	cannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results.



	46.	The master budget of Benedict Company shows that the planned activity level for next year is expected to be 50,000 machine hours. At this level of activity, the following manufacturing overhead costs are expected:
			Indirect labor	$360,000
			Machine supplies	90,000
			Indirect materials	105,000
			Depreciation on factory building	    75,000
			Total manufacturing overhead	$630,000
		A flexible budget for a level of activity of 60,000 machine hours would show total manufacturing overhead costs of
		a.	$741,000.
		b.	$630,000.
		c.	$756,000.
		d.	$681,000.

	47.	A department has budgeted monthly manufacturing overhead cost of $90,000 plus $3 per direct labor hour. If a flexible budget report reflects $174,000 for total budgeted manufacturing cost for the month, the actual level of activity achieved during the month was
		a.	88,000 direct labor hours.
		b.	28,000 direct labor hours.
		c.	58,000 direct labor hours.
		d.	cannot be determined.

	48.	Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets?
		a.	Direct materials cost
		b.	Direct labor cost
		c.	Variable manufacturing overhead
		d.	Fixed manufacturing overhead

	49.	In developing a flexible budget within a relevant range of activity,
		a.	only fixed costs are included.
		b.	it is necessary to relate variable cost data to the activity index chosen.
		c.	it is necessary to prepare a budget at 1,000 unit increments.
		d.	variable and fixed costs are combined and are reported as a total cost.

	50.	The flexible budget
		a.	is prepared before the master budget.
		b.	is relevant both within and outside the relevant range.
		c.	eliminates the need for a master budget.
		d.	is a series of static budgets at different levels of activity.