Chapter 10 accounting (and extra)
A detailed plan for the future that is usually expressed in formal quantitative terms is ______.
budget
When a manager creates a budget that is too easy to attain, Blank______ occurs.
budgetary slack
example of profit center
company divisions, departments, or products themselves
example of investment center
company with multiple segments or locations
A business segment whose manager has control over cost but has no control over revenue or investments in operating assets
cost center
An organization in which decision-making authority is not confined to a few top executives but rather is spread throughout the organization
decentralized organization
The manager of a(n) __________ center has control over costs, revenue, and investments in operating assets.
investment
A business segment whose manager has control over cost, revenue, and investments in operating assets
investment center
Cash, accounts receivable, inventory, plant and equipment, and all other assets held for operating purposes
operating assets
A business segment whose manager has control over cost and revenue but has no control over investments in operating assets
profit center
Any business segment whose manager has control over costs , revenues , or investments in operating assets
responsibility center
The usual starting point for a master budget is:
sales budget
process time + inspection time + move time + queue time
throughput time
Manufacturing cycle efficiency formula
value added time / throughput time
Delivery Cycle Time Formula
wait time + throughput time
Disadvantages of Decentralization
-duplication of costs -problems achieving goal congruence
Advantages of Decentralization
-frees top management time -improves customer relations -provides training -improves motivation and retention -responses are quicker
Quick to Ship Company has a process time of 2 days and a throughput time of 8 days. The manufacturing cycle efficiency is ______.
0.25 (2/8)
Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is ______ units.
13,000
Last year sales were $300,000, net operating income was $75,000, and average operating assets were $500,000. If sales next year remain the same as last year and expenses and average operating assets are reduced by 5%, what will be the return on investment next year?
18.2% (300,000) - (225,000 *.95)= 86,250. 86,250 / (500,000 *.95) = 18.2 %
Macey, Inc.'s investment center had average operating assets of $350,000, revenues of $1,050,000 and net operating income of $70,000. Return on investment is Blank______.
20% (70,000 / 350,000)
Macey, Inc.'s investment center had average operating assets of $350,000, revenues of $1,050,000 and net operating income of $70,000. Return on investment is Blank______.
20% = 70,000/ 350,000
The standard price of materials is $3.50 per pound and the standard quantity allowed for actual output is 7,000 pounds. If the actual quantity purchased and used was 6,700 pounds, and the actual price per pound was $3.40, the direct materials price variance is $
670, favorable
An integrated set of performance measures that are derived from and support the organization's strategy
Balanced scorecard
What are the 3 main types of responsibility centers?
Cost, profit, and investment centers
Return on investment equals margin divided by turnover true or false?
False
The throughput time increases when wait time increases when the wait time increases. And the delivery cycle time is unaffected by queue time. True or false?
False
Net operating income is income before what 2 things?
Interest and taxes
Some criticisms of return on investment include
Managers being told in increase ROI isn't always enough, plus they don't always have full control, plus investment opportunities may not always be enough.
In order to fully understand how a manager's decisions can affect ROI, both ___ and ___ should be computed
Margin * Turnover
Return on Investment Formula
Net Operating Income / Average Operating Assets
Margin Formula
Net Operating Income / Sales
Income before interest and income taxes have been deducted
Net operating income
Wait time, move time, inspection time, queue time are what?
Non value added time
Example of balanced scorecard
Offering satisfying things and good customer service but sacrificing other things
Financial measures don't measure what drives....
Organizational performance
Under variable costing, fixed manufacturing overhead is what kind of cost?
Period cost
Budgets are used for what 2 distinct purposes?
Planning and controlling
Under absorption costing, fixed manufacturing overhead is in what kind of costs?
Product cost
Managers in which of the following responsibility centers are held responsible for profits?
Profit and investment center
Residual income formula?
Residual Income = Net Operating Income - (Average Operating Assets * Minimum Required Rate of Return)
Decentralized organizations have what kind of system?
Responsibility accounting system
Increase sales, reduce operating expenses, reduce operating assets, these are ways to increase __________.
Return on investment
Margin * turnover equals
Return on investment
Turnover Formula
Sales divided by average operating assets
Sales revenue equals
Selling price per unit * units sold
What are partial company owners?
Stockholders
The elapsed time from when production is started until finished goods are shipped
Throughput time
Residual income should be higher than zero true or false?
True
The balanced scorecard contains 4 categories of performance measures true or false?
True
nonoperating assets are excluded from investments true or false?
True
Wages and salaries actual results are $106,900. The planning budget is 102,000 is it favorable or unfavorable?
Unfavorable
Process time is a ___________ added __________
Value, time