Which term describes the situation in which a manager intentionally over budgets expenses or under budgets revenue Budgetary slack Benefits of budgeting include coordination and communication planning The comprehensive planning document for the entire organization is called the master budget Which of the following budgets must be prepared first Sales Budget The operating budgets culminate in the budgeted income statement Which of the following are non cash expenses that will always result in differences between the budgeting operating expenses for a given period and the budgeted cash payments for the same period Depreciation expense and bad debt expense Which budget reflects the company s plans to invest in new property plant and equipment Capital expenditures budget Which of the following budgets is unique to merchandising companies Cost of Goods Sold Inventory and Purchases budget Companies often decentralize their operations by Geographic area product line and customer base Which of the following is NOT an advantage of decentralization Achieving goal congruence In terms of responsibility centers a large corporate division would be considered an investment center Which of the following is true Favorable variances are variances that cause operating income to be higher than budgeted A segment margin is the operating income generated by subtracting only direct fixed expenses from a segment s contribution margin Cost centers are only responsible for controlling costs therefore their performance reports only include information on actual versus budgeted costs Likewise perfor mance reports for revenue centers only contain actual versus budgeted revenue However profit centers are responsible for controlling both costs and generating revenue Therefore the perfor mance reports contain actual and budgeted information on both their revenues and costs Management by exception is a management technique that directs attention to important differences between actual and budgeted amounts Managers investigate large favorable variances They want to identify the reason for exceptional results so that other parts of the organization may also benefit Which of the following is not a valid strategy for determining a transfer price Using the price set by GAAP Which of the following is false The volume variance is due to causes other than volume So this means that the difference between actual results and the master budget is called the master budget variance the master budget variance can be split into two components a volume variance and a flexible budget variance and the flexible budget is prepared using the actual volume achieved during the period is ALL TRUE Number of new products developed would be a key performance indicator KPI for which of the four balanced scorecard perspectives Internal Business Hours of employee training would be a key performance indicator KPI for which of the following balanced scorecard perspectives Learning and growth Which of the following is true A standard is a budget for one unit Which of the following is not an advantage of using standard costs Standards can cause unintended behavioral consequences which means that standards that simplify bookkeeping useful for budgeting and serve as cost benchmarks are all advantages Which of the following is not true about the fixed overhead budget variance It is the difference between the budgeted fixed overhead and the standard fixed overhead allocated to production Which means budget variances can be referred to as the fixed OH spending variance can be between actual fixed overhead and budgeted fixed overhead and they can be either favorable or unfavorable Which of the following methods of analyzing capital investments factors in the time value of money Internal rate of return After identifying potential capital investments the next step in capital building process is the estimate future net cash inflows of the investments Time value of depends on of periods principle and interest rate of return Which of the following is false with regards to the payback period It is computed as follows regardless of whether cash flows are equal or unequal Initial investment Expected annual net cash inflow which means that the following are all TRUE regarding the payback period it gives no indication of the investment s profitability it is the length of time it takes to recover the initial cost of the capital investment Which of the following methods focus es on the operating income an asset generates rather than the net cash inflows it generates Accounting Rate of Return The internal rate of return is which of the following The interest rate which makes the NPV of an investment equal to zero An investment is which of the following The present value of the investment minus the investment s initial investment When potential capital investments of different size are compared management should choose the one with the highest profitability index Which of the following methods calculates the invest ment s unique rate of return Internal rate of return Merchandising Companies sales budget cogs inventory and purchases budget operating expenses budget budgeted income state ment financial budgets are the same Service Companies no merchandise inventory operating budgets that are sales operating expenses budgeted income statement In a cost center managers are accountable for costs only In a revenue center managers are accountable primarily for revenues and could be responsible for costs of their own sales operation In a profit center managers are accountable for both revenues and costs and therefore profits In an investment center managers are responsible for 1 generating revenues 2 controlling costs and 3 efficiently managing the division s assets Investment centers are generally large divisions of a corporation Investment centers are treated almost as if they were stand alone compa nies Which budget reflects plans to invest in new property plant and equip Capital expenditures budget True the capital expenditures budget is not a component of the operating budget when creating a production budget the desire ending inventory is defined by the company To prepare operating budgets you start with the production budget FALSE One disadvantage of decentralization is duplication of costs TRUE When calculating Direct Labor variances rate is the same as Price Managers WILL want to use management by excep tion to determine which variances are significant enough to