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79. Stone Industries uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $48,000 variable and $270,000 fixed. If Stone had actual overhead costs of $321,000 for 18,000 units produced, what is the difference between actual and budgeted costs? a. $3,000 unfavorable b. $3,000 favorable c. $9,000 unfavorable d. $12,000 favorable 80. A company’s planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: Variable Fixed Indirect materials $140,000 Depreciation $60,000 Indirect labor 200,000 Taxes 10,000 Factory supplies 20,000 Supervision 50,000 A flexible budget prepared at the 80,000 machine hours level of activity would show total manufacturing overhead costs of a. $288,000. b. $360,000. c. $384,000. d. $408,000. 81. In the Goblette Manufacturing Company, indirect labor is budgeted for $108,000 and factory supervision is budgeted for $36,000 at normal capacity of 160,000 direct labor hours. If 180,000 direct labor hours are worked, flexible budget total for these costs is: a. $144,000. b. $162,000. c. $157,500. d. $148,500. 82. Chambers, Inc. uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Chambers had actual overhead costs of $250,000 for 18,000 units produced, what is the difference between actual and budgeted costs? a. $2,000 unfavorable. b. $2,000 favorable. c. $6,000 unfavorable. d. $8,000 favorable. 83. A company’s planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: Variable Fixed Indirect materials $120,000 Depreciation $50,000 Indirect labor 160,000 Taxes 10,000 Factory supplies 20,000 Supervision 40,000 A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of a. $270,000. b. $360,000. c. $370,000. d. $300,000. 84. Kevin Jarvis Industries produced 192,000 units in 90,000 direct labor hours. Production for the period was estimated at 198,000 units and 99,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at a. 96,000 hours and 99,000 hours. b. 99,000 hours and 90,000 hours. c. 96,000 hours and 90,000 hours. d. 90,000 hours and 90,000 hours. 85. A company’s planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs: Variable Fixed Indirect materials $90,000 Depreciation $37,500 Indirect labor 120,000 Taxes 7,500 Factory supplies 15,000 Supervision 30,000 A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of a. $202,500. b. $270,000. c. $277,500. d. $225,000. 86. Kathleen Corp. produced 320,000 units in 150,000 direct labor hours. Production for the period was estimated at 330,000 units and 165,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at a. 160,000 hours and 165,000 hours. b. 165,000 hours and 150,000 hours. c. 160,000 hours and 150,000 hours. d. 150,000 hours and 150,000 hours. \ 87. At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects the vertical axis at $30,000. At 15,000 direct labor hours, a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $90,000. Fixed and variable costs may be expressed as: a. $30,000 fixed plus $4 per direct labor hour variable. b. $30,000 fixed plus $6 per direct labor hour variable. c. $60,000 fixed plus $2 per direct labor hour variable. d. $60,000 fixed plus $4 per direct labor hour variable. 88. At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials: a. $1,400 unfavorable. b. $1,400 favorable. c. $600 favorable. d. $600 unfavorable. 89. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called a. static reporting. b. flexible accounting. c. responsibility accounting. d. master budgeting. 90. Power Manufacturing recorded operating data for its shoe division for the year. Sales $1,500,000 Contribution margin 300,000 Controllable fixed costs 180,000 Average total operating assets 600,000 How much is controllable margin for the year? a. 20% b. 50% c. $300,000 d. $120,000 91. A cost is considered controllable at a given level of managerial responsibility if a. the manager has the power to incur the cost within a given time period. b. the cost has not exceeded the budget amount in the master budget. c. it is a variable cost, but it is uncontrollable if it is a fixed cost. d. it changes in magnitude in a flexible budget. 92. As one moves up to each higher level of managerial responsibility, a. fewer costs are controllable. b. the responsibility for cost incurrence diminishes. c. a greater number of costs are controllable. d. performance evaluation becomes less important. 93. A responsibility report should a. be prepared in accordance with generally accepted accounting principles. b. show only those costs that a manager can control. c. only show variable costs. d. only be prepared at the highest level of managerial responsibility. 94. Top management can control a. only controllable costs. b. only noncontrollable costs. c. all costs. d. some noncontrollable costs and all controllable costs. 95. Not-for-profit entities a. do not use responsibility accounting. b. utilize responsibility accounting in trying to maximize net income. c. utilize responsibility accounting in trying to minimize the cost of providing services. d. have only noncontrollable costs. 96. Which of the following is not a true statement? a. All costs are controllable at some level within a company. b. Responsibility accounting applies to both profit and not-for-profit entities. c. Fewer costs are controllable as one moves up to each higher level of managerial responsibility. d. The term segment is sometimes used to identify areas of responsibility in decentralized operations. 97. Costs incurred indirectly and allocated to a responsibility level are considered to be a. nonmaterial. b. mixed. c. controllable. d. noncontrollable. 98. Management by exception a. is most effective at top levels of management. b. can be implemented at each level of responsibility within an organization. c. can only be applied when comparing actual results with the master budget. d. is the opposite of goal congruence. 99. Which responsibility centers generate both revenues and costs? a. Investment and profit centers b. Profit and cost centers c. Cost and investment centers d. Only profit centers 100. The linens department of a large department store is a. not a responsibility center. b. a profit center. c. a cost center. d. an investment center. 101. The foreign subsidiary of a large corporation is a. not a responsibility center. b. a profit center. c. a cost center. d. an investment center. 102. The maintenance department of a manufacturing company is a(n) a. segment. b. profit center. c. cost center. d. investment center. 103. Which of the following is not a correct match? 1. Incurs costs 2. Generates revenue 3. Controls investment funds a. Investment Center 1, 2, 3 b. Cost Center 1 c. Profit Center 1, 2, 3 d. All are correct matches. 104. A cost center a. only incurs costs and does not directly generate revenues. b. incurs costs and generates revenues. c. is a responsibility center of a company which incurs losses. d. is a responsibility center which generates profits and evaluates the investment cost of earning the profit. 105. A manager of a cost center is evaluated mainly on a. the profit that the center generates. b. his or her ability to control costs. c. the amount of investment it takes to support the cost center. d. the amount of revenue that can be generated. 106. Performance reports for cost centers compare actual a. total costs with static budget data. b. total costs with flexible budget data. c. controllable costs with static budget data. d. controllable costs with flexible budget data. 107. In the performance report for cost centers, a. controllable and noncontrollable costs are reported. b. fixed costs are not reported. c. no distinction is made between fixed and variable costs. d. only materials and controllable costs are reported. 108. Of the following choices, which contain both a traceable fixed cost and a common fixed cost? a. Profit center manager’s salary and timekeeping costs for a responsibility center’s employees. b. Company president’s salary and company personnel department costs. c. Company personnel department costs and timekeeping costs for a responsibility center’s employees. d. Depreciation on a responsibility center’s equipment and supervisory salaries for the center. Ans: C, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation 109. Which of the following is not an indirect fixed cost? a. Company president’s salary b. Depreciation on the company building housing several profit centers c. Company personnel department costs d. Profit center supervisory salaries 110. A profit center is a. a responsibility center that always reports a profit. b. a responsibility center that incurs costs and generates revenues. c. evaluated by the rate of return earned on the investment allocated to the center. d. referred to as a loss center when operations do not meet the company’s objectives. 111. The best measure of the performance of the manager of a profit center is the a. rate of return on investment. b. success in meeting budgeted goals for controllable costs. c. amount of controllable margin generated by the profit center. d. amount of contribution margin generated by the profit center. 112. Controllable margin is defined as a. sales minus variable costs. b. sales minus contribution margin. c. contribution margin less controllable fixed costs. d. contribution margin less noncontrollable fixed costs. 113. Controllable margin is most useful for a. external financial reporting. b. preparing the master budget. c. performance evaluation of profit centers. d. break-even analysis. 114. Which of the following will not result in an unfavorable controllable margin difference? a. Sales exceeding budget; costs under budget b. Sales exceeding budget; costs over budget c. Sales under budget; costs under budget d. Sales under budget; costs over budget 115. Given below is an excerpt from a management performance report: Budget Actual Difference Contribution margin $1,000,000 $1,050,000 $50,000 Controllable fixed costs $ 500,000 $ 450,000 $50,000 The manager’s overall performance a. is 20% below expectations. b. is 20% above expectations. c. is equal to expectations. d. cannot be determined from information given. 116. Which of the following are financial measures of performance? 1. Controllable margin 2. Product quality 3. Labor productivity a. 1 b. 2 c. 3 d. 1 and 3 117. Given below is an excerpt from a management performance report: Budget Actual Difference Contribution margin $600,000 $580,000 $20,000 U Controllable fixed costs $200,000 $220,000 $20,000 U The manager’s overall performance a. is 10% above expectations. b. is 10% below expectations. c. is equal to expectations. d. cannot be determined from the information provided. 118. A responsibility report for a profit center will a. not show controllable fixed costs. b. not show indirect fixed costs. c. show noncontrollable fixed costs. d. not show cumulative year-to-date results. 119. The dollar amount of the controllable margin a. is usually higher than the contribution margin. b. is usually lower than the contribution margin. c. is always equal to the contribution margin. d. cannot be a negative figure. 120. Pippen Co. recorded operating data for its shoe division for the year. The company’s desired return is 5%. Sales $1,000,000 Contribution margin 200,000 Total direct fixed costs 120,000 Average total operating assets 400,000 Which one of the following reflects the controllable margin for the year? a. 20% b. 50% c. $60,000 d. $80,000

79. Stone Industries uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $48,000 variable and $270,000 fixed. If Stone had actual overhead costs of $321,000 for 18,000 units produced, what is the difference between actual and budgeted costs?

a. $3,000 unfavorable

b. $3,000 favorable

c. $9,000 unfavorable

d. $12,000 favorable

80. A company’s planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:

Variable Fixed

Indirect materials $140,000 Depreciation $60,000

Indirect labor 200,000 Taxes 10,000

Factory supplies 20,000 Supervision 50,000

A flexible budget prepared at the 80,000 machine hours level of activity would show total manufacturing overhead costs of

a. $288,000.

b. $360,000.

c. $384,000.

d. $408,000.

81. In the Goblette Manufacturing Company, indirect labor is budgeted for $108,000 and factory supervision is budgeted for $36,000 at normal capacity of 160,000 direct labor hours. If 180,000 direct labor hours are worked, flexible budget total for these costs is:

a. $144,000.

b. $162,000.

c. $157,500.

d. $148,500.

82. Chambers, Inc. uses flexible budgets. At normal capacity of 16,000 units, budgeted manufacturing overhead is: $64,000 variable and $180,000 fixed. If Chambers had actual overhead costs of $250,000 for 18,000 units produced, what is the difference between actual and budgeted costs?

a. $2,000 unfavorable.

b. $2,000 favorable.

c. $6,000 unfavorable.

d. $8,000 favorable.

 

83. A company’s planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:

Variable Fixed

Indirect materials $120,000 Depreciation $50,000

Indirect labor 160,000 Taxes 10,000

Factory supplies 20,000 Supervision 40,000

A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of

a. $270,000.

b. $360,000.

c. $370,000.

d. $300,000.

84. Kevin Jarvis Industries produced 192,000 units in 90,000 direct labor hours. Production for the period was estimated at 198,000 units and 99,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at

a. 96,000 hours and 99,000 hours.

b. 99,000 hours and 90,000 hours.

c. 96,000 hours and 90,000 hours.

d. 90,000 hours and 90,000 hours.

85. A company’s planned activity level for next year is expected to be 100,000 machine hours. At this level of activity, the company budgeted the following manufacturing overhead costs:

Variable Fixed

Indirect materials $90,000 Depreciation $37,500

Indirect labor 120,000 Taxes 7,500

Factory supplies 15,000 Supervision 30,000

A flexible budget prepared at the 90,000 machine hours level of activity would show total manufacturing overhead costs of

a. $202,500.

b. $270,000.

c. $277,500.

d. $225,000.

86. Kathleen Corp. produced 320,000 units in 150,000 direct labor hours. Production for the period was estimated at 330,000 units and 165,000 direct labor hours. A flexible budget would compare budgeted costs and actual costs, respectively, at

a. 160,000 hours and 165,000 hours.

b. 165,000 hours and 150,000 hours.

c. 160,000 hours and 150,000 hours.

d. 150,000 hours and 150,000 hours.

\

87. At zero direct labor hours in a flexible budget graph, the total budgeted cost line intersects the vertical axis at $30,000. At 15,000 direct labor hours, a horizontal line drawn from the total budgeted cost line intersects the vertical axis at $90,000. Fixed and variable costs may be expressed as:

a. $30,000 fixed plus $4 per direct labor hour variable.

b. $30,000 fixed plus $6 per direct labor hour variable.

c. $60,000 fixed plus $2 per direct labor hour variable.

d. $60,000 fixed plus $4 per direct labor hour variable.

88. At 18,000 direct labor hours, the flexible budget for indirect materials is $36,000. If $37,400 are incurred at 18,400 direct labor hours, the flexible budget report should show the following difference for indirect materials:

a. $1,400 unfavorable.

b. $1,400 favorable.

c. $600 favorable.

d. $600 unfavorable.

89. The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called

a. static reporting.

b. flexible accounting.

c. responsibility accounting.

d. master budgeting.

90. Power Manufacturing recorded operating data for its shoe division for the year.

Sales $1,500,000

Contribution margin 300,000

Controllable fixed costs 180,000

Average total operating assets 600,000

How much is controllable margin for the year?

a. 20%

b. 50%

c. $300,000

d. $120,000

91. A cost is considered controllable at a given level of managerial responsibility if

a. the manager has the power to incur the cost within a given time period.

b. the cost has not exceeded the budget amount in the master budget.

c. it is a variable cost, but it is uncontrollable if it is a fixed cost.

d. it changes in magnitude in a flexible budget.

 

92. As one moves up to each higher level of managerial responsibility,

a. fewer costs are controllable.

b. the responsibility for cost incurrence diminishes.

c. a greater number of costs are controllable.

d. performance evaluation becomes less important.

93. A responsibility report should

a. be prepared in accordance with generally accepted accounting principles.

b. show only those costs that a manager can control.

c. only show variable costs.

d. only be prepared at the highest level of managerial responsibility.

94. Top management can control

a. only controllable costs.

b. only noncontrollable costs.

c. all costs.

d. some noncontrollable costs and all controllable costs.

95. Not-for-profit entities

a. do not use responsibility accounting.

b. utilize responsibility accounting in trying to maximize net income.

c. utilize responsibility accounting in trying to minimize the cost of providing services.

d. have only noncontrollable costs.

96. Which of the following is not a true statement?

a. All costs are controllable at some level within a company.

b. Responsibility accounting applies to both profit and not-for-profit entities.

c. Fewer costs are controllable as one moves up to each higher level of managerial responsibility.

d. The term segment is sometimes used to identify areas of responsibility in decentralized operations.

97. Costs incurred indirectly and allocated to a responsibility level are considered to be

a. nonmaterial.

b. mixed.

c. controllable.

d. noncontrollable.

 

98. Management by exception

a. is most effective at top levels of management.

b. can be implemented at each level of responsibility within an organization.

c. can only be applied when comparing actual results with the master budget.

d. is the opposite of goal congruence.

99. Which responsibility centers generate both revenues and costs?

a. Investment and profit centers

b. Profit and cost centers

c. Cost and investment centers

d. Only profit centers

100. The linens department of a large department store is

a. not a responsibility center.

b. a profit center.

c. a cost center.

d. an investment center.

101. The foreign subsidiary of a large corporation is

a. not a responsibility center.

b. a profit center.

c. a cost center.

d. an investment center.

102. The maintenance department of a manufacturing company is a(n)

a. segment.

b. profit center.

c. cost center.

d. investment center.

103. Which of the following is not a correct match?

1. Incurs costs

2. Generates revenue

3. Controls investment funds

a. Investment Center 1, 2, 3

b. Cost Center 1

c. Profit Center 1, 2, 3

d. All are correct matches.

 

104. A cost center

a. only incurs costs and does not directly generate revenues.

b. incurs costs and generates revenues.

c. is a responsibility center of a company which incurs losses.

d. is a responsibility center which generates profits and evaluates the investment cost of earning the profit.

105. A manager of a cost center is evaluated mainly on

a. the profit that the center generates.

b. his or her ability to control costs.

c. the amount of investment it takes to support the cost center.

d. the amount of revenue that can be generated.

106. Performance reports for cost centers compare actual

a. total costs with static budget data.

b. total costs with flexible budget data.

c. controllable costs with static budget data.

d. controllable costs with flexible budget data.

107. In the performance report for cost centers,

a. controllable and noncontrollable costs are reported.

b. fixed costs are not reported.

c. no distinction is made between fixed and variable costs.

d. only materials and controllable costs are reported.

108. Of the following choices, which contain both a traceable fixed cost and a common fixed cost?

a. Profit center manager’s salary and timekeeping costs for a responsibility center’s employees.

b. Company president’s salary and company personnel department costs.

c. Company personnel department costs and timekeeping costs for a responsibility center’s employees.

d. Depreciation on a responsibility center’s equipment and supervisory salaries for the center.

Ans: C, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation

109. Which of the following is not an indirect fixed cost?

a. Company president’s salary

b. Depreciation on the company building housing several profit centers

c. Company personnel department costs

d. Profit center supervisory salaries

 

110. A profit center is

a. a responsibility center that always reports a profit.

b. a responsibility center that incurs costs and generates revenues.

c. evaluated by the rate of return earned on the investment allocated to the center.

d. referred to as a loss center when operations do not meet the company’s objectives.

111. The best measure of the performance of the manager of a profit center is the

a. rate of return on investment.

b. success in meeting budgeted goals for controllable costs.

c. amount of controllable margin generated by the profit center.

d. amount of contribution margin generated by the profit center.

112. Controllable margin is defined as

a. sales minus variable costs.

b. sales minus contribution margin.

c. contribution margin less controllable fixed costs.

d. contribution margin less noncontrollable fixed costs.

113. Controllable margin is most useful for

a. external financial reporting.

b. preparing the master budget.

c. performance evaluation of profit centers.

d. break-even analysis.

114. Which of the following will not result in an unfavorable controllable margin difference?

a. Sales exceeding budget; costs under budget

b. Sales exceeding budget; costs over budget

c. Sales under budget; costs under budget

d. Sales under budget; costs over budget

115. Given below is an excerpt from a management performance report:

Budget Actual Difference

Contribution margin $1,000,000 $1,050,000 $50,000

Controllable fixed costs $ 500,000 $ 450,000 $50,000

The manager’s overall performance

a. is 20% below expectations.

b. is 20% above expectations.

c. is equal to expectations.

d. cannot be determined from information given.

 

116. Which of the following are financial measures of performance?

1. Controllable margin

2. Product quality

3. Labor productivity

a. 1

b. 2

c. 3

d. 1 and 3

117. Given below is an excerpt from a management performance report:

Budget Actual Difference

Contribution margin $600,000 $580,000 $20,000 U

Controllable fixed costs $200,000 $220,000 $20,000 U

The manager’s overall performance

a. is 10% above expectations.

b. is 10% below expectations.

c. is equal to expectations.

d. cannot be determined from the information provided.

118. A responsibility report for a profit center will

a. not show controllable fixed costs.

b. not show indirect fixed costs.

c. show noncontrollable fixed costs.

d. not show cumulative year-to-date results.

119. The dollar amount of the controllable margin

a. is usually higher than the contribution margin.

b. is usually lower than the contribution margin.

c. is always equal to the contribution margin.

d. cannot be a negative figure.

120. Pippen Co. recorded operating data for its shoe division for the year. The company’s desired return is 5%.

Sales $1,000,000

Contribution margin 200,000

Total direct fixed costs 120,000

Average total operating assets 400,000

Which one of the following reflects the controllable margin for the year?

a. 20%

b. 50%

c. $60,000

d. $80,000

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