chapter 10- budget control

Question 1

static budget

Answer 1

a projection on budget data at one level of activity

Question 2

budgetary control includes

Answer 2

1. Developing budgets.
2. Analyzing the differences between actual and budgeted results.
3. Taking corrective action.
4. Modifying future plans, if necessary.

Question 3

flexible budgets

Answer 3

series of static budgets at different activity levels

• production data
• cost data

Question 4

developing flexible budget steps

Answer 4

1. Identify the activity index and the relevant range of activity.
2. Identify the variable costs, and determine the budgeted variable cost per unit of activity for each cost.
3. Identify the fixed costs, and determine the budgeted amount for each cost.
4. Prepare the budget for selected increments of activity within the relevant range.

Question 5

management by exeption

Answer 5

means that top management’s reviews of a budget report is focused primarily on differences between actual results and planned objectives

Question 6

materiality

Answer 6

without quantitive guidelines management would have to investigate every budgets difference regardless of the amount

Question 7

ROI return on investment

Answer 7

shows the effectives of the manager in using assets in their disposal

Question 8

ROI formula

Answer 8

controllable margin / average operating assets

Question 9

ROI judgemental factors

Answer 9

valuation of operating assets

Margin (income) measure

Question 10

valuation of operating assets

Answer 10

Operating assets may be valued at acquisition cost, book value, appraised value, or market value.

Question 11

Margin (income) measure

Answer 11

This measure may be controllable margin, income from operations, or net income.