CHAPTER 10 Budgetary Control and Responsibility Accounting ASSIGNMENT CLASSIFICATION TABLE Learning Objectives Questions Exercises Do It Exercises Problems Problems Brief A B 3 4 5 1 2 1 2 8 10 3A 3B 3 4 5 1 2 1A 2A 3A 1B 2B 3B 1 Describe the concept of 1 2 budgetary control 2 Evaluate the usefulness of static budget reports 3 Explain the development of flexible budgets and the usefulness of flexible budget reports 6 7 8 9 10 11 12 4 Describe the concept of responsibility accounting 13 14 15 16 17 18 24 5 6 Indicate the features of responsibility reports for cost centers 19 Identify the content of responsibility reports for profit centers 20 21 6 7 7 Explain the basis and 22 23 24 8 9 10 3 4 1 1 3 4 5 6 7 8 9 10 11 12 9 11 14 15 16 16 17 18 19 13 6A 6B 4A 5A 4B 5B 7B formula used in evaluating performance in investment centers between ROI and residual income chapter 8 Explain the difference 25 26 11 12 20 21 7A Note All asterisked Questions Exercises and Problems relate to material contained in the appendix to the 10 1 Copyright 2012 John Wiley Sons Inc Weygandt Managerial Accounting 6 e Solutions Manual For Instructor Use Only ASSIGNMENT CHARACTERISTICS TABLE Problem Number Description Difficulty Level Time Allotted min Simple 20 30 1A 2A 3A 4A 5A 6A 7A 1B 2B 3B 4B 5B 6B Prepare flexible budget and budget report for manufacturing overhead Prepare flexible budget budget report and graph for manufacturing overhead Moderate 30 40 State total budgeted cost formula and prepare flexible budget reports for two time periods Simple 20 30 Prepare responsibility report for a profit center Prepare responsibility report for an investment center and compute ROI Moderate Moderate 20 30 40 50 Prepare reports for cost centers under responsibility accounting and comment on performance of managers Moderate 40 50 Compare ROI and residual income Prepare flexible budget and budget report for manufacturing overhead Moderate Simple 25 35 20 30 Prepare flexible budget budget report and graph for manufacturing overhead Moderate 30 40 State total budgeted cost formula and prepare flexible budget reports for two time periods Simple 20 30 Prepare responsibility report for a profit center Prepare responsibility report for an investment center and compute ROI Moderate Moderate 20 30 40 50 Prepare reports for cost centers under responsibility accounting and comment on performance of managers Moderate 40 50 7B Compare ROI and residual income Moderate 25 35 10 2 Copyright 2012 John Wiley Sons Inc Weygandt Managerial Accounting 6 e Solutions Manual For Instructor Use Only B L O O M S T A X O N O M Y T A B L E Correlation Chart between Bloom s Taxonomy Learning Objectives and End of Chapter Exercises and Problems Learning Objective 1 Describe the concept of budgetary control Knowledge Comprehension E10 1 Application Analysis Synthesis Evaluation P10 3B 2 Evaluate the usefulness of static budget reports 3 Explain the development of flexible budgets and the usefulness of flexible budget reports E10 1 Q10 9 Q10 12 E10 1 4 Describe the concept of responsibility accounting 5 6 Indicate the features of responsibility reports for cost centers Identify the content of responsibility reports for profit centers 7 Explain the basis and formula used in evaluating performance in investment centers 8 Explain the difference between ROI and residual income Broadening Your Perspective Q10 19 Q10 25 Q10 26 Q10 1 Q10 2 Q10 3 Q10 4 Q10 6 Q10 7 Q10 8 Q10 10 Q10 13 Q10 14 Q10 15 Q10 16 Q10 20 Q10 21 Q10 22 Q10 23 Q10 24 Q10 5 BE10 1 BE10 2 Q10 11 BE10 4 DI10 1 DI10 2 E10 3 E10 5 E10 13 Q10 17 Q10 18 Q10 24 BE10 6 E10 9 E10 11 BE10 7 DI10 3 E10 16 BE10 8 BE10 9 BE10 10 DI10 4 BE10 11 BE10 12 BYP10 5 P10 3A P10 3B BE10 5 E10 4 E10 6 P10 1A P10 3A P10 1B P10 6A P10 6B E10 14 E10 15 P10 4A P10 4B E10 19 E10 2 E10 10 E10 7 E10 9 E10 10 E10 11 E10 12 E10 16 E10 17 E10 18 E10 8 BE10 3 E10 8 P10 2A P10 2B P10 5A P10 5B P10 7B E10 20 E10 21 P10 7A BYP10 4 BYP10 6 BYP10 7 BYP10 2 BYP10 3 BYP10 8 BYP10 9 C o p y r i g h t 2 0 1 2 i l J o h n W e y S o n s I n c W e y g a n d t M a n a g e r i a l A c c o u n t i n g 6 e S o u l t i o n s M a n u a l F o r I n s t r u c t o r U s e O n y l 1 0 3 ANSWERS TO QUESTIONS 1 a Budgetary control is the use of budgets in controlling operations b The steps in budgetary control are 1 Develop the planned objectives budget 2 Analyze differences between actual and budgeted results 3 Take corrective action 4 Modify future plans if necessary 2 Purpose Name of Report Frequency Primary Recipient s a b c Scrap Departmental overhead costs Income statement Daily Monthly Monthly and Quarterly Production manager Department manager Top management 3 4 5 6 7 8 9 The budget report for the second quarter can include year to date information as well as data for the second quarter There is no justification for Ken s concern The sales budget is derived from the sales forecast and it represents management s best estimate of sales Thus it is a useful basis for evaluating sales performance A static budget is an appropriate basis for evaluating a manager s effectiveness in controlling costs when 1 The actual level of activity closely approximates the master budget activity level and or 2 The behavior of the costs in response to changes in activity is fixed Yes this is true A flexible budget is a series of static budgets at different levels of activity The performance is unfavorable The budgeted indirect labor cost in the static budget is 1 35 per direct labor hour 54 000 40 000 At 45 000 direct labor hours budgeted costs are 60 750 45 000 X 1 35 Thus indirect labor is 3 250 over budget 64 000 60 750 The performance is favorable Factory insurance is a fixed cost At 50 000 direct labor hours the budgeted cost is still 6 500 Thus factory insurance is 200 under budget 6 500 6 300 The steps in preparing a flexible budget are 1 2 Identify the activity index and the relevant range of activity Identify the variable costs and determine the budgeted variable cost per unit of activity for each cost Identify the fixed costs and determine the budgeted amount for each cost 3 4 Prepare the budget …
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