Question

Tab - erhead can be calculated as 3. The Standard Cost Driverage for vare Select one: a Split Cost Actual Application Mate b. Split Cost/Standard Application Rate Actual Cost / Standard Application rate d Standard Cost/Actual Application Rate e None of the above Caps Loch ht SS. Under estimating production levels will likely lead to Select one: a. Unfavorable flexible budget variances b. Favorable flexible budget variances C Unfavorable static budget variances d. Favorable static budget variances e. None of the above 56. Which of the following is needed in order to prepare the flexible bude performance report? Select one: a. Standard variable overhead cost driver usages b. Actual production levels c. Actual overall variable costs d. Budgeted per-unit direct materials costs e. All of the above 37. Which of the following are not reasons to involve lower management in making business decisions? Select one: a. Allows upper management to concentrate more on overall strategy and business development without being involved in the minutia of the day-to- day operations b. Provides on-the-job training to less-experienced managers, allowing them to make mistakes and grow c. Encourages job satisfaction among lower-level employees d. Allows managers to set expectations for their departments, without having to consider the goals and capacity of other departments e. All of the above are reasons to involve lower management 38. Which of the following managers would be most concerned about a segment's ROA? Select one: a. Cost Center Manager b. Profit Center Manager c. Investment Center Manager d. Human Resources Manager e. None of the above

Answer 1

34. c.Actual cost/Standard application rate

The nature of variable overhead cost is to change along the output level. It changes with units produced. So, these are treated as direct cost and so, standard cost driver usage = Actual cost/Standard application rate

35.c. Unfavorable static budget variance

The production levels when underestimated means that budget will also be underestimated. Likewise, with higher actual production levels, the actual resultant cost will be high resulting in unfavorable static budget variances.

36.e. All of the above

The flexible budget performance report compares across standard budget, actual and flexible budget using the items related to units produced as standard, actual and flexible. The material costs across budgeted, actual and flexible are also included. Hence, correct option is (e)

37.d. Allows managers to set expectations for their departments, without having to consider the goals and capacity of other departments.

a,b and c are reasons to involve lower management. The lower management gives valuable management insight to upper level to make effective decisions taking data of other department. Hence, d is not the reason to involve lower management in making business decisions.

38.c. Investment center manager

ROA is ratio of net income to the investment in particular segment. Hence, the most concerned manager to segment’s ROA would be investment center manager.

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