Screening Exam

Responsibility Accounting – Strat. Cost Mgmt.

Name___________________________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Responsibility accounting:
A) is a system that measures the plans, budgets, actions, and actual results of a responsibility center
B) is an arrangement of lines of responsibility within the organization
C) explicitly incorporates continuous improvement anticipated during the budget period
D) examines how a result will change if the original plan is not achieved

2) Responsibility centers include all of the following EXCEPT:

A) cost B) revenue C) customers D) investment

3) Variances between actual and budgeted amounts can be used to:

A) alert managers to potential problems and available opportunities
B) inform managers about how well the company has implemented its strategies
C) signal that company strategies are ineffective
D) All of these answers are correct.

4) A maintenance manager is most likely responsible for a(n):

A) revenue center B) investment center C) cost center D) profit center

5) The regional sales office manager of a national firm is most likely responsible for a(n):
A) revenue center B) investment center C) cost center D) profit center

6) A regional manager of a restaurant chain in charge of finding additional locations for expansion is most
likely responsible for a(n):
A) revenue center B) investment center C) cost center D) profit center

7) A manager of a revenue center is responsible for all of the following EXCEPT:

A) service quality and units sold
B) the acquisition cost of the product or service sold
C) price, product mix, and promotional activities
D) investments of excess cash

8) A manager of a profit center is responsible for all of the following EXCEPT:

A) sales revenue B) the cost of merchandise purchased for resale
C) expanding into new geographic areas D) selling and marketing costs

9) A responsibility accounting system could:

A) exclude all uncontrollable costs
B) exclude controllable costs
C) segregate uncontrollable costs from controllable costs
D) Both A and C are correct.

10) Which statement about controllability is NOT true:

A) few costs are clearly under the sole influence of one manager
B) holds managers responsible for uncontrollable costs
C) with a long enough time span, all costs will come under somebody's control
D) describes the degree of influence that managers have over a particular item

11) Controllability may be difficult to pinpoint because of all the following EXCEPT:
A) some costs depend on market conditions
B) current managers may have inherited inefficiencies of a previous manager
C) the current use of stretch or challenge targets
D) few costs are under the sole influence of one manager

12) Responsibility accounting:

A) emphasizes controllability
B) focuses on whom should be asked about the information
C) attempts to assign blame for problems to a specific manager
D) All of these answers are correct.
13) Which of the following is NOT likely to be a shared service department?
A) Copying department B) Accounting department
C) Advertising for a single department D) Payroll department

14) What do we call the practice of directing executive attention to important deviations from budgeted
amounts?
A) Management by exception B) Management by objective
C) Management by control D) Management by analysis

15) During April, Cherry Company had actual sales of $180,000 compared to budgeted sales of $195,000. Actual
cost of goods sold was $135,000, compared to a budget of $136,500. Monthly operating expenses, budgeted
at $28,000, totaled $25,000. Interest revenue of $2,500 was earned during April but had not been included in
the budget. The performance report for April would show a net income variance of what amount?
A) $8,000 B) $13,000 C) $(8,000) D) $(13,000)

16) During July, Neptune Company had actual sales of $144,000 compared to budgeted sales of $156,000. Actual
cost of goods sold was $108,000, compared to a budget of $109,200. Monthly operating expenses, budgeted at
$22,400, totaled $20,000. Interest revenue of $2,000 was earned during July but had not been included in the
budget. The performance report for July would show a net income variance of what amount?
A) $6,400 B) $10,400 C) $(6,400) D) $(10,400)

17) XYZ Company budgeted $4 million for customer service costs, but actually spent only $3 million. Which of
the following statements indicates the best course of action for management to take?
A) Because this $1 million variance is favorable, management does not need to investigate further.
B) Management will investigate this $1 million favorable variance to ensure that the cost savings do not
reflect skimping on customer service.
C) Management will investigate this $1 million unfavorable variance to try to identify and correct the
problem.
D) Management should investigate every variance, especially unfavorable ones.

18) Information technology has made many tasks easier, but not all tasks. Which of the following tasks requires
more critical thinking skills than the others because it is not as dependent upon information technology?
A) Sensitivity analysis
B) Rolling up individual units' budgets into the companywide budget
C) Removing slack from the budget
D) Preparing responsibility center performance reports that identify variances between actual and
budgeted revenues and costs

19) The manager of a profit center would not be responsible for which of the following?
A) Managing the cost of inventory purchases B) Generating revenue
C) Managing the cost of employee wages D) Managing the cost of new building purchases

20) Responsibility accounting performance reports should not be used to:

A) evaluate division performance.
B) evaluate individual product lines.
C) compare actual results to the budget.
D) direct blame to particular individuals when variances are unfavorable.