Chapter 16 – Management control systems
MULTIPLE CHOICE
1. Which of the following is not an objective of responsibility accounting?
a.
to redesign processes to be more effective
b.
to align individual and organizational goals
c.
to influence behaviour
d.
to increase profitability
2. Which of the following is not an essential element of responsibility accounting?
a.
assigning responsibility
b.
establishing performance measures
c.
evaluating performance
d.
ridiculing poor performers
3. When budgets are used for control,
a.
budgeted amounts from different years are compared.
b.
actual amounts from different years are compared.
c.
budgeted amounts are compared to actual amounts.
d.
None of these is correct.
Figure 16-1
Armati, SA., is looking for feedback on company performance. The company compares the budget for
the year with the actual costs. Data have been collected below:
Armati, SA., had the following budgeted data:
Unit sales for 2011
26,000
Unit production for 2011
26,000
Budgeted fixed overhead for 2011:
Supervision
£ 800
Depreciation
2,000
Rent
100
Budgeted variable costs per unit:
Direct materials
£0.15
Direct labour
0.20
Supplies
0.02
Indirect labour
0.05
Power
0.02
The following actually occurred:
Actual unit sales for 2011
24,000
Actual unit production for 2011
28,000
Actual fixed overhead for 2011:
Supervision
£ 850
Depreciation
2,000
Rent
100
Actual variable costs:
Direct materials
£3,500
Direct labour
4,900
Supplies
530
Indirect labour
1,250
Power
470
4. Refer to Figure 16-1. The static budget variance for rent is
a.
£100 F.
b.
£100 U.
c.
£-0-.
d.
£50 U.
5. Refer to Figure 16-1. The static budget variance for direct materials is
a.
£100 F.
b.
£100 U.
c.
£400 F.
d.
£400 U.
Actual
Budget
Variance
6. Refer to Figure 16-1. The static budget variance for total fixed overhead is
a.
£50 U.
b.
£50 F.
c.
£-0-.
d.
£100 U.
Actual
Actual
£100
Budget
_100
Variance
£ -0-
7. Refer to Figure 16-1. The static budget variance for supplies is
a.
£10 U.
b.
£10 F.
c.
£50 U.
d.
£50 F.
8. Refer to Figure 16-1. The static budget for total variable costs is
a.
£90 U.
b.
£180 U.
c.
£790 F.
d.
£880 F.
9. Refer to Figure 16-1. The flexible budget for direct materials cost in 2011 is
a.
£3,500.
b.
£3,600.
c.
£3,900.
d.
£4,000.
10. Refer to Figure 16-1. The total flexible budgeted costs for 2011 are
a.
£10,560.
b.
£13,460.
c.
£13,510.
d.
£11,340.
11. Refer to Figure 16-1. The flexible budget for rent in 2011 is
a.
£100.
b.
£200.
c.
£2,900.
d.
£2,950.
12. Refer to Figure 16-1. The flexible budget variance for indirect labour for 2011 is
a.
£1,250 F.
b.
£50 F.
c.
£50 U.
d.
£1,200 U.
13. Refer to Figure 16-1. The flexible budget variance for total cost for 2011 is
a.
£90 U.
b.
£140 U.
c.
£230 U.
d.
£50 U.
14. Refer to Figure 16-1. The flexible budget variance for supervision for 2011 is
a.
£67 F.
b.
£67 U.
c.
£50 F.
d.
none of these.
15. If the static budget variance for materials is £200 F and the budgeted cost for materials is £52,000,
then the actual cost of materials is
a.
£52,000.
b.
£52,200.
c.
£51,200.
d.
£51,800.
16. The static budget variance for materials is £200 F and the budgeted cost for materials is £52,000. If the
budgeted volume is 13,000 and the actual volume is 13,500, then the flexible budget variance is
a.
£2,200 F.
b.
£3,000 F.
c.
£2,000 F.
d.
£1,800 F.
17. If production was budgeted at 400 units and the actual production was 420 units, what would be the
static budget variance for materials if the actual cost of materials was £4,150 and the budgeted cost per
unit is £10?
a.
£50 F
b.
£200 U
c.
£100 F
d.
£150 U
18. If production was budgeted at 400 units and the actual production was 420 units, what would be the
flexible budget variance for materials if the actual cost of materials was £4,150 and the budgeted cost
per unit is £10?
a.
£50 F
b.
£200 U
c.
£100 F
d.
£150 U
Actual
£4,150
Budget
_4,200
Variance
£ 50 F
19. Flexible budgets do NOT provide
a.
expected costs for a range of activity.
b.
budgeted costs for the actual level of activity.
c.
budgeted costs for a predetermined level of activity.
d.
expected costs for the actual performance level.
20. The budget most appropriate for control purposes is the
a.
static budget.
b.
flexible budget.
c.
continuous budget.
d.
incremental budget.
Figure 16-2
Glenn, SA., has done a cost analysis for its production of T-shirts. The following activities and cost
drivers have been developed:
Activity
Cost Formula
Maintenance
£11,000 + £2 per machine hour
Machining
£55,000 + £3 per machine hour
Inspection
£70,000 + £500 per batch
Setups
£2,000 per batch
Purchasing
£80,000 + £150 per purchase order
Following are the actual costs of producing 75,000 T-shirts: 5,000 machine hours; 10 batches; 20
purchase orders
Maintenance
£20,000
Machining
73,000
Inspection
73,000
Setups
18,000
21. Refer to Figure 16-2. What is the budget variance for maintenance in an activity-based performance
report?
a.
£1,000 U
b.
£3,000 U
c.
£3,000 F
d.
none of the above
22. Refer to Figure 16-2. What is the budget variance for machining in an activity-based performance
report?
a.
£1,000 U
b.
£2,000 U
c.
£3,000 U
d.
none of the above
23. Refer to Figure 16-2. What is the budget variance for inspection in an activity-based performance
report?
a.
£1,000 F
b.
£2,000 F
c.
£3,000 F
d.
none of the above
24. Refer to Figure 16-2. What is the budget variance for setups in an activity-based performance report?
a.
£1,000 F
b.
£2,000 F
c.
£3,000 F
d.
none of the above
25. Refer to Figure 16-2. What is the budget variance for purchasing in an activity-based performance
report?
a.
£1,000 U
b.
£2,000 U
c.
£3,000 U
d.
none of the above
Actual
£82,000
Budget
_83,000
Variance
£ 1,000 F
26. Refer to Figure 16-2. What is the budget variance for total costs in an activity-based performance
report?
a.
£1,000 F
b.
£2,000 F
c.
£3,000 F
d.
none of the above
Actual
£266,000
Budget
_269,000
Variance
£ 3,000 F
Figure 16-3
Harald, SA., has done a cost analysis for its production of bumper stickers. The following activities
and cost drivers have been developed:
Activity
Cost Formula
Maintenance
£11,000 + £0.11 per machine hour
Machining
£25,000 + £0.50 per machine hour
Setups
£50 per batch
Purchasing
£200 + £45 per purchase order
Actual
£18,000
Budget
_20,000
Variance
£ 2,000 F
Following are the actual costs of producing 85,000 stickers: 5,000 machine hours; 10 batches; 20
purchase orders
Maintenance
£11,500
Machining
28,300
Setups
550
Purchasing
1,000
27. Refer to Figure 16-3. What is the budget variance for maintenance in an activity-based performance
report?
a.
£50 F
b.
£50 U
c.
£550 U
d.
£550 F
28. Refer to Figure 16-3. What is the budget variance for machining in an activity-based performance
report?
a.
£50 F
b.
£50 U
c.
£800 U
d.
none of the above
Actual
£28,300
Budget
_27,500
Variance
29. Refer to Figure 16-3. What is the budget variance for setups in an activity-based performance report?
a.
£50 F
b.
£50 U
c.
£800 U
d.
none of the above
Actual
Budget
Variance
Actual
£11,500
Budget
_11,550
Variance
£ 50 F
30. Refer to Figure 16-3. What is the budget variance for purchasing in an activity-based performance
report?
a.
£50 F
b.
£50 U
c.
£100 U
d.
none of the above
31. Refer to Figure 16-3. What is the budget variance for total costs in an activity-based performance
report?
a.
£700 U
b.
£700 F
c.
£800 U
d.
none of the above
Actual
£41,350
Budget
_40,650
Variance
£ 700 U
Figure 16-4
Villafane, SA., has done a cost analysis for its production of decals. The following activities and cost
drivers have been developed:
Activity
Cost Formula
Design
£5,000 + £0.05 per machine hour
Machining
£25,000 + £0.01 per machine hour
Setups
£35 per batch
Purchasing
£50 + £15 per purchase order
Following are the actual costs of producing 35,000 decals: 1,000 machine hours; 5 batches; 30
purchase orders
Design
£5,080
Machining
?
Setups
?
Purchasing
£600
The following variances were given in the activity performance report:
Actual
£1,000
Budget
_1,100
Variance
£ 100 F
32. Refer to Figure 16-4. What is the actual cost of machining?
a.
£24,970
b.
£25,010
c.
£25,050
d.
none of the above
33. Refer to Figure 16-4. What is the actual cost of setups?
a.
£160
b.
£190
c.
£300
d.
none of the above
34. Refer to Figure 16-4. What is the activity variance for design?
a.
£40 F
b.
£30 U
c.
£15 F
d.
£100 U
35. Refer to Figure 16-4. What is the activity variance for purchasing?
a.
£500 U
b.
£100 U
c.
£50 U
d.
none of the above
36. Goal congruence means
a.
there is alignment of organizational and managerial goals.
b.
the organization is aligned to the needs of the environment.
c.
the organization is aligned to shareholder goals.
d.
there is no divergence between organization and stockholder goals.
37. Which of the following is NOT a key feature of an ideal budgetary system?
a.
participation
b.
incentives
c.
accountability for noncontrollable costs
d.
feedback on performance
38. Which of the following is NOT a key feature of an ideal budgetary system?
a.
controllable costs
b.
single measure for performance
c.
incentives
d.
frequent feedback
39. An example of a negative incentive is
a.
promotion.
b.
nonfinancial incentive.
c.
feedback reports.
d.
termination of employment.
40. Which of the following is NOT an advantage of participative budgeting?
a.
encourages incrementalism
b.
encourages communication
c.
encourages responsibility
d.
encourages creativity
41. Which of the following is NOT a potential disadvantage of participative budgeting?
a.
pseudoparticipation
b.
performance feedback
c.
unrealistic standards
d.
budgetary slack