ACC 561 Week 5 Assignment

1. Why are budgets useful in the planning process?

• They enable the budget committee to earn their paycheck.
• They provide management with information about the company’s past performance.
• They help communicate goals and provide a basis for evaluation.
• They guarantee the company will be profitable if it meets its objectives.

2. A common starting point in the budgeting process is

• a clean slate, with no expectations.
• expected future net income.
• past performance.
• to motivate the sales force. 

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3. Which of the following statements about budget acceptance in an organization is true?

• The most widely accepted budget by the organization is the one prepared by top management.
• Budgets are hardly ever accepted by anyone except top management.
• The most widely accepted budget by the organization is the one prepared by the department heads.
• Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process.

4. What is budgetary control?

• The process of providing information on budget differences to lower level managers
• Another name for a flexible budget
• The degree to which the CFO controls the budget
• The use of budgets in controlling operations 

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5. The comparison of differences between actual and planned results

• is done by the external auditors.
• appears on the company’s external financial statements.
• is usually done orally in departmental meetings.
• appears on periodic budget reports.

6. A static budget

• should not be prepared in a company.
• is useful in evaluating a manager’s performance by comparing actual variable costs and planned variable costs.
• shows planned results at the original budgeted activity level.
• is changed only if the actual level of activity is different than originally budgeted. 

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7. A responsibility report should

• show only those costs that a manager can control.
• only show variable costs.
• only be prepared at the highest level of managerial responsibility.
• be prepared in accordance with generally accepted accounting principles.

8. Which responsibility centers generate both revenues and costs?

• Only profit centers
• Profit and cost centers
• Cost and investment centers
• Investment and profit centers 

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9. The linens department of a large department store is

• an investment center.
• not a responsibility center.
• a profit center.
• a cost center.

10. What is a standard cost?

• The total number of units times the budgeted amount expected
• Any amount that appears on a budget
• The amount management thinks should be incurred to produce a good or service
• The total amount that appears on the budget for product costs 

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11. Using standard costs

• increases clerical costs.
• makes employees less “cost-conscious.”
• provides a basis for evaluating cost control.
• makes management by exception more difficult.

12.Unfavorable materials price and quantity variances are generally the responsibility of the

Price                                       Quantity

• Production department                    Purchasing department
• Production department                   Production department
• Purchasing department                  Purchasing department
• Purchasing department                  Production department

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