The purpose of a flexible budget is to:
remove items from performance reports that are not controllable by managers.
permit managers to reduce the number of unfavorable variances that are reported.
update the static planning budget to reflect the actual level of activity of the period.
reduce the amount of conflict between departments when the master budget is prepared
A static budget:
should be compared to actual costs to assess how well costs were controlled.
should be compared to a flexible budget to assess how well costs were controlled
is valid for only one level of activity.
represents the best way to set spending targets for managers
In computing the margin in a ROI analysis, which of the following is used?
Sales in the denominator
Net operating income in the denominator
Average operating assets in the denominator
Residual income in the denominator
Which of the following will not result in an increase in the residual income, assuming other factors remain constant?
An increase in sales
An increase in the minimum required rate of return
A decrease in expenses
A decrease in operating assets
All other things the same, which of the following would increase residual income?
Increase in average operating assets
Decrease in average operating assets
Increase in minimum required return
Decrease in net operating income
Which of the following three statements are correct?
A profit center has control over both cost and revenue
An investment center has control over invested funds, but not over costs and revenue
A cost center has no control over sales.
The purpose of the Data Processing Department of Falena Corporation is to assist the various departments of the corporation with their information needs free of charge. The Data Processing Department would best be evaluated as a:
Cost center
Revenue center
profit center
investment center
Actual Revenues > Budgeted Revenues
Favorable
Unfavorable
Actual Revenues < Budgeted Revenues
Actual Expenses > Budgeted Expenses
Actual Expenses < Budgeted Expenses
For Costs:
(+)Unfavorable (-) Favorable
(-)Unfavorable (+)Favorable
For Sales:
(+)favorable (-)unfavorable
(-)favorable (+)unfavorable
Final, delivered cost of materials, net of discounts
Price Standards
Quality Standards
Use product design specifications
Product standards
Rate Standards
Activity Standards
Use wage surveys and labor contracts
Time Standards
Use time and motion studies for each labor operation
Time standards
Rate standards
Price standards
The activity is the base used to calculate the POH
Which variance involves the quantity purchased?
Price Variance
Quantity Variance
Which variance involves quantity used?
Quantity variance
Who is generally responsible for rate variances?
Production Managers
Purchasing Managers
General Managers
Segment whose manager has control over both costs and revenues, but no control over investment funds.
Cost Center
Profit Center
Investment Center
Segment who's manager has control over costs, revenues, and investments in operating assets
The Cost, Profit and Investment Centers all fall under what Center
Responsibility
Managerial
Planning
Budgeting
Income before interest and taxes
Net operating income
real income
average operating assets
none of the above
What falls under "average operating assets"
Cash
Accounts Recievable
Inventory
Plant & Equipment
Income
Revenues
ROI=
Net operating income/average operating income
Average operating income/net operating income
Sales/net operating income
average operating income/sales
Margin x Turnover
What are 3 ways to improve ROI
Increase Sales
Reduce Expenses
Reduce assets
Decrease sales
Increase assets
Margin=
Net operating income/average operating assets
sales/assets
Net operating income/sales
Average operating assets/sales
Turnover=
average operating assets/sales
sales/average operating assets
