ACCY 121

Which of the following will not result in an increase in the residual income, assuming other factors remain constant?

An increase in the minimum required rate of return

Which of the following budgets is not required in a service organization?

Cost of goods sold

All other things the same, which of the following would increase residual income?

Decrease in average operating assets

The forecasting method in which individual forecasts of group members are submitted anonymously and evaluated by the group as a whole is called:

Delphi technique

In developing a master budget for a manufacturing company, which one of the following items should be done first?

Development of a sales budget

Which of the following is not a benefit of budgeting?

It reduces the need for tracking actual cost activity

Which of the following is FALSE concerning the Payback method of capital budgeting?

It uses the accrual accounting rate of return

Which of the following statements regarding variances is (are) false? (A) In general and holding all other things constant, an unfavorable variance decreases operating profits. (B) A favorable variance is not always good, and an unfavorable variance is not always bad.

Neither A nor B is false

Which of the following statements is (are) true regarding the master budget? (A) A master budget consists of (a) organizational goals, (b) strategic long-range profit plan, and (c) tactical short-range profit plan. (B) A master budget consists of only a budgeted (a) income statement, (b) balance sheet, and (c) stockholders' equity statement.

Neither A nor B is true

How will increases in the following items affect return on investment (ROI)? Expenses Inventory A. Decrease Decrease B. Decrease Increase C. Increase Decrease D. Increase Increase

Option A

Which department is customarily held responsible for an unfavorable materials quantity variance?

Production

Which of the following statements about the net present value method is true?

Projects with higher net present values are preferred when all other factors are equal

Which of the following statements does not represent a limitation of using return on investment (ROI) for measuring and evaluating performance?

ROI cannot be used to compare divisions of different sizes

In computing the margin in a ROI analysis, which of the following is used?

Sales in the denominator

Which of the following is the most probable reason a company would experience an unfavorable labor rate variance and a favorable labor efficiency variance?

The mix of workers assigned to the particular job was heavily weighted towards the use of higher paid experienced individuals

Which of the following is true, concerning NPV?

The project recovers the initial investment and earns a return greater than the RRR

The starting point in preparing a comprehensive budget for a manufacturing company limited by its ability to produce and not by its ability to sell is

an estimate of productive capacity

The variable overhead price variance is due to:

both price and efficiency items

The production volume variance is computed by the difference between the:

budget at actual levels of activity reached and fixed overhead applied

The number of units required for production is equal to:

budgeted sales plus units in the ending inventory minus the units in the beginning inventory

The sales price variance is the difference between the actual sales revenues and the:

budgeted selling price multiplied by the actual number of units sold

A variance can best be described as:

differences between planned results and actual results

The asset turnover is a measure (ratio) of an investment center's ability to:

generate sales

A manager can always increase his/her return on investment (ROI) by:

increasing the operating profit margin

Problems encountered when the payback method is used may include

it neglects the time value of money

When the net present value method is used, only projects with ________ are ________.

positive net present value; acceptable

A master budget:

presents the plan for only one level of activity and does not adjust to changes in the level of activity

The difference between operating profits in the master budget and operating profits in the flexible budget is called:

sales activity variance

In NPV analysis, if the IRR exceeds the RRR,

the NPV is positive when project cash flows are discounted at the RRR

If a division is evaluated using return on investment (ROI) without regard to how assets are financed, the denominator in the ROI calculation will be:

total assets available

The amount of materials to be purchased during the budget period is equal to budgeted:

total production needs plus units in the ending materials inventory minus the units in the beginning materials inventory