Question;205. The use of budgets in controlling operations is;known as ________________.;206. A;major aspect of budgetary control is the use of budget reports that compare;with _______________________.;207. In analyzing differences from planned;objectives, management may take ___________________, or it could decide to;modify ___________________.;208. The master budget is a;budget which is based on operating at one budgeted activity level.;209. A __________________ budget projects budget;data for various levels of activity.;210. Total ________________ costs will be the;same on the master budget and on a flexible budget which reflects the actual;level of activity.;211. Under ___________________ accounting, the;evaluation of a manager's performance is based on the costs and revenues;directly under that manager's control.;212. A cost is __________________ at a given;level of managerial responsibility if a manager has the authority to incur the;cost in a given time period.;213. In general, costs;directly by the level of responsibility are _______________, whereas costs that;are ____________________ to the responsibility level are __________________.;214. Responsibility centers may be classified;into three types: (1)____________________, (2)___________________ and;(3)____________________.;215. The primary basis for evaluating the;performance of a manager of an investment center is _________________.;216. Return on investment is calculated by;dividing _________________________ by ________________________.;MATCHING;217. Match the items below by;entering the appropriate code letter in the space provided.;A. Budgetary control G. Responsibility reporting system;B. Static budget H. Return on Investment;C. Flexible budget I. Profit center;D. Responsibility accounting J. Investment center;E. Controllable costs K. Indirect fixed costs;F. Management by exception L. Direct fixed costs;1. The review of budget reports by top management;directed entirely or primarily to differences between actual results and;planned objectives.;2. A part of management accounting that involves;accumulating and reporting revenues and costs on the basis of the individual;manager who has the authority to make the day-to-day decisions about the items.;3. The preparation of reports for each level of;responsibility shown in the company's organization chart.;4. A projection of budget data at one level of;activity.;5. Costs that a manager has the authority to;incur within a given period of time.;6. The use of budgets to control operations.;7. A projection of budget data for various levels;of activity.;8. A responsibility center that incurs costs;generates revenues, and has control over the investment funds available for;use.;9. Costs that relate specifically to a;responsibility center and are incurred for the sole benefit of the center.;10. A responsibility center that incurs costs and;also generates revenues.;11. Costs which are incurred for the benefit of;more than one profit center.;12. A measure of the profitability of an;investment center computed by dividing controllable margin (in dollars) by;average operating assets.;Ans;N/A, LO: 1?7, Bloom: K, Difficulty: Easy, Min: 5, AACSB: Analytic, AICPA BB;Industry/Sector, AICPA FN: Reporting, AICPA PC: Problem Solving, IMA: Reporting;SHORT-ANSWER ESSAY QUESTIONS;S-A E 218;The master budget and flexible budgets are;important aids to management in performing the management functions of planning;and control. Briefly describe how planning and control are facilitated by;preparing a master budget and flexible budgets. How are these two types of;budgets interrelated with planning and control?;S-A E 219;Brad Ventura is confused about how a;flexible budget is prepared. Identify the steps for Brad.;S-A E 220;Managers are motivated to accomplish objectives;if they feel that their efforts will be fairly evaluated. Explain why an;organization may use different bases for evaluating the performance of managers;of different types of responsibility centers.;S-A E 221;What is;responsibility accounting? Explain the purpose of responsibility accounting.;S-A E 222 (Ethics);Dixon;Corporation evaluates its managers based on return on investment (ROI). Kathryn;Bricker and Lindsey Allan, managers of the electronics and housewares;departments respectively, have recently suffered from declining profits in;their departments. Over lunch, they discuss the problem, and how they could;improve performance. Most of the discussion centers around ways to increase;sales. Near the end of the lunch period, however, Lindsey remarks that there;are two components to consider, and that they have considered only one. She;wonders whether there is some way to reduce investment, and by decreasing the;denominator of the ROI fraction, to improve the final result.;Back at work, Kathryn continues to;mull over Lindsey's remarks. She decides to pursue the matter further, and;before the end of the quarter she has sold quite a bit of older equipment and;replaced it with equipment obtained with a short-term lease. Her performance;measured by ROI, is markedly improved, although sales continue to be;disappointing.;Required;1. Who are the stakeholders in;this situation?;2. Is Kathryn's action;ethical? Briefly explain.;S-A E 223 (Communication);Eiger Manufacturing manufactures circuit boards;for computer-controlled appliances for the home. The sales have been very;volatile, sometimes stressing the plant's capacity, and sometimes depressingly;slow. During a recent slow period, Nathan Jones, a production supervisor;complained to Janet Smith, accounting manager, about the flexible budget.;I try as hard as I can to meet the;budget," he says, "and then I find out that just meeting the budget's;not good enough. Last month, when we sold 8,000 units, I was $10,000 under my;budget, and then you all blow me out of the water with your report that I;actually was $5,000 over, because sales were slow. I thought this;responsibility accounting business was supposed to mean we are held accountable;just for things we can control. How do we control sales? At the beginning of;the year, you gave us all targets. Mine says that for an average month of;10,000 unit sales, I should spend about $82,000. I spend less, and get an;unfavorable budget report. What gives?;Required;Write a short;memo to respond to Mr. Jones.
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