Question

QUESTION 10

1. Which of the following types of budgeting procedures is the most effective for measuring performance?

		Static budgeting
		Capital budgeting
		Flexible budgeting
		Strategic budgeting

QUESTION 11

1. The flexible budget:

		Is not constrained to the relevant range
		Eliminates the need for a master budget
		Is prepared before the master budget
		Is a series of static budgets at different levels of activity

QUESTION 12

1. Responsiblity accounting is the concept:

		A firm is responsible for reporting to the public all activities that have a social impact, such as pollution control
		Each activity within a firm is controlled by a manager who is accountable for costs; costs and revenues; or costs, revenues, and investments, depending on the degree of responsibillity assigned
		A firm should apply generally accepted accounting principles on a basis consistent with preceding years
		A firm should be objective in accounting and should use historical costs rather than current-value concepts

QUESTION 13

1. In which of the following is a manager responsible for costs, revenues and assets?

		Revenue center
		Cost center
		Profit center
		Investment center

QUESTION 14

1. Pharmall Company manufactures two types of medicine, Ezsleep and Pepeze. The company can sell as many bottles of each product as it can produce, but production is limited by availability of direct labor hours. The revenues, costs and labor products for the two products are shown below. How much larger or samller would Pharmall's earnings be if the company proudcted Pepeze instead of Ezsleep with the 1,000 available direct labor hours?

			EZ Sleep	Pepeze
Selling price per 100 bottles			$400	$600
Variable costs per 100 bottles			$240	$200
Labor costs per 100 bottles			10	20
		$4,000 larger
		$4,000 smaller
		$6,000 larger
		$6,000 smaller

Answer 1

10 Answer is Flexible budgeting Flexible budget is a variation of static budget for actual level of activity it helps in meaningful comparison of actual results with the budget Flexible performance budgeting report is the most commonly used budgeting system 11 Is a series of static budgets at different levels of activity Flexible budget is a variation of static budget for actual level of activity The variable cost per unit remains at par with budgeted level of activity Fixed cost is same for static budget and flexible budget. The variance is zero for fixed cost 12 Each activity within a firm is controlled by a manager who is accountable for costs; responsibility assigned costs and revenues; or costs, revenues, and investments, depending on the degree of Responsibility accounting is giving accountability and responsibility to respective department or division to manage the cost, revenue or assets It can be cost center, revenue center, profit center or an investment center 13 Investment center A Investment center is responsible for the cost, revenues and assets The profit generated is measured through Return on investment and Residual income Targets are given at the beginning of the year and measured based on actual performance 14 $4,000 larger Selling price Variable cost Contribution margin Labor cost per labor hour Difference in contribution margin Labor hours Larger income EZ Sleep $400 $240 $160 10 $16 Pepeze $600 $200 $400 20 $20 $4 1,000 $4,000