question

document that quantifies a company's plan for achieving its goals

answer

budget

question

requires justification of budgeted amounts at the start of each budget period

answer

zero-base budgeting

question

amounts managers include in budgets to assure that budgeted amounts can be easily achieved

answer

budgetary slack

question

investigating only those variances that are significant

answer

management by exception

question

management by exception is investigating only

answer

the variances which are significant

question

responsible for preparing the master budget

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budget committee

question

incorporates a number of individual budgets

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master budget

question

a budget that is not adjusted for the actual level of activity

answer

static budget

question

used to evaluate how managers and their operations performed

answer

performance report

question

the difference between budgeted and actual cost

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budget variance

question

a budget that is adjusted for the actual level of activity

answer

flexible budget

question

why budget?

answer

plan for future profitability, show how management will acquire and control resources, motivate individuals, improve coordination, efficiency, and communication

question

what are the 5 general principles of budgeting

answer

top management support, participation in goal setting, responsibility account, communication of results, flexibility

question

what are the 4 steps to the budgeting process

answer

make broad assumptions, prep planned operating budget, prep flexible operating budget, prep financial budget

question

underestimating revenue or overestimating costs

answer

budget padding

question

the difference between the revenue or cost projection that a manager provides and a realistic estimate of the revenue or cost

answer

budgetary slack

question

why would people pad budgets with budgetary slack

answer

make them look better

question

cost that management believes should be incurred to product a product or service under anticipated conditions

answer

standard cost

question

the term standard cost often refers to the cost of a

answer

single unit

question

the term ________ ___ often refers to the cost, at standard, of the total number of budgeted unit

answer

budgeted cost

question

what is the primary benefit of a standard costing system

answer

it allows a comparison of differences between actual and standard costs

question

what are the 6 variances

answer

material price, material quantity, labor rate, labor efficiency, overhead volume, controllable overhead

question

how can a linear compensation plan help the budgeting process

answer

rewards people for what they do (not what they say they do), no incentive to falsify information

question

selling things knowing they will be returned

answer

channel stuffing

question

why would managers resist changing to a linear incentive structure

answer

it means giving up the rewards that come with beating the budget

question

measurements used to evaluate the success of a company

answer

key performance indicators

question

forecasts that are created every few months

answer

rolling forecasts

question

what is the difference between a fixed performance contract and a relative performance contract?

answer

fixed performance has fixed target, fixed incentives, rigid. relative performance has continuous planning, local decision making and decentralized, more flexible

question

in developing standard costs, some managers emphasize ____ standards while others use _____ standards

answer

ideal, attainable

question

____ standards assume there will be no obstacles to the production process will be encountered

answer

ideal

question

______ standards are standard costs that take into account the possibility that a variety of circumstances may lead to costs that are greater than ideal

answer

attainable

question

what does an unfavorable overhead volume variance mean

answer

production was less than anticipated

question

(true/false) standard cost variances provide definitive evidence that costs are out of control and managers are not performing effectively

answer

false (must look @ facts behind the variances)

question

3 types of subunits

answer

cost centers, profit centers, investment centers

question

a subunit that has responsibility for controlling costs but does not have responsibility for generating revenues

answer

cost center

question

a subunit that has responsibility for generating revenues as well as controlling costs

answer

profit center

question

a subunit that is responsible for generating revenue, controlling costs, and investing in assets

answer

investment center

question

investment center performance measures should include

answer

profit and investment

question

EVA and RI are (the same/different)

answer

the same

question

what is the problem with budgets

answer

they encourage fraud and games and cause your company to be less adaptable

question

how do kpis fulfill the self regulatory functions of budgets

answer

they serve as benchmarks for the company as it works to achieve its goals

question

potential benefits of budgeting

answer

plan for future (forecast), shows control of resources, motivation, better coordination in company

question

budgeting is used for two distinct purposes

answer

planning and control

question

the cash budget is composed of four major sections

answer

receipts, disbursements, cash excess/deficiency, financing

question

advantages of standard cost

answer

helps managers focus on important issues, promote economy and efficiency, provide benchmarks, simplify bookkeeping

question

disadvantages of standard cost

answer

just meeting standards is not enough, standard reports are updated like monthly and will be useless once they come out, if managers

question

responsibility accounting systems strive to

answer

provide information to managers

question

when actual cost is less than standard cost

answer

favorable variance

question

actual unit produced time standard overhead rate

answer

applied overhead

question

based on the assumption that nothing will go wrong

answer

ideal standard

question

based on the normal amount of defects and breakdowns

answer

attainable standard

question

difference between standard and actual cost

answer

standard cost variance

question

a firm that grants substantial decision making authority to subunit managers

answer

decentralized organization

question

investing only the variances that are significant

answer

management by exception

question

when a manager's goals do not coincide with the overall company goals

answer

lack of goal congruence

question

residual income adjusted for accounting distortions

answer

economic value added

question

the manager is responsible for revenues and costs

answer

profit center

question

indicates that a business has either generated more revenue than expected or incurred fewer expenses than expected

answer

favorable

question

describes instances where actual costs are greater than the standard or expected costs.

answer

unfavorable

question

paying less than expected for direct materials results in a

answer

favorable price variance

question

why might a company experience both a favorable materials price variance and an unfavorable quantity variance

answer

poor quality materials were purchased

question

an unfavorable labor rate variance may results from

answer

rising wages

question

what are the two most likely reasons an unfavorable total materials variance may exist

answer

price paid was more than standard, quantity budgeted was less than quantity used

question

which variances are most important to investigate

answer

those that are material in amount

question

for which of the following reasons does the volume variance arise? a. overhead costs incurred were greater or less than the amount budgeted b. the company operated at more or less units of production activity than expected during the period c. actual activity equaled the volume used to establish the overhead cost per unit d. the company purchased more or less materials for production than the amount used

answer

b

question

what is true concerning an insignificant material quantity variance in a standard costing system

answer

closed to cogs at year end

question

if a company uses responsibility accounting, a shift supervisor in the austin production plant should be held responsible for

answer

direct costs incurred on his shift

question

return on investment is used to evaluate

answer

investment centers

question

development of a budget: a. is required by gaap b. is a task best completed by the controller working alone c. enhances communication and coordination among managers d. guarantees that the company will be profitable

answer

c

question

which of the following is a reasonable order in which to prepare budgets? a. budgeted income statement, sales budget, cash receipts, and disbursements budget b. cash receipts and disbursements budget, capital acquisitions budget, labor budget c. sales budget, production budget, material purchases budget d. labor budget, budgeted income statement, sales budget

answer

c.

question

which of the budgets is prepared last

answer

budgeted balance sheet

question

setting the sales budget is very important because: a. the rest of the master budget is driven by the sales budget b. many performance targets are set by the sales budgets c. bonuses are often at stake based on achieving the sales budget d. all of the above

answer

d

question

managers could use which of the following to achieve a budget income target in a given period a. shift discretionary expenses to the next period b. encourage customers to take shipments at the end of the period they don't want until the next period c. fraudulently recognize the next period's sales in the current period d. all of the avoce

answer

d

question

what is the difference between a linear compensation arrangement and a non linear (kinked) compensation arrangement? identify and explain two problems that could occur if a non-linear arrangement is used to compensate salespeople

answer

dd

question

there are many problems associated with using traditional budgeting process. identify and explain two problems.

answer

s

question

which one is a percentage and which is a dollar amount (roi and ri)

answer

roi is a percentage, ri is a dollar amount

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