ACC 241 Exam 3 ASU Test Questions
and Correct Answers 2025-2026
Updated.
Budget Committee - Answer A group of upper managers who are responsible for overall policy
matters relating to the budget program and for coordinating the preparation of the budget and
its final review approval
Cost Center - Answer A business unit that is only responsible for the costs that it incurs. The
manager of this unit is not responsible for revenue generation or asset usage. The performance
of this unit is usually evaluated through the comparison of budgeted to actual costs
Financial Budgets - Answer The budgets that project the collection and payment of cash, as
well as forecast the company's budgeted balance sheet
Investment Center - Answer A business unit within an entity that has responsibility for its own
revenue, expenses, and assets. Management evaluates the unit based on its return on those
assets invested specifically in that unit
Line of Credit - Answer A commitment from a lender to pay a company whenever it needs
cash, up to a pre-set maximum level. It is generally secured by company assets, and for that
reason, bares an interest rate not far above the prime rate. The bank will typically charge an
annual maintenance fee, irrespective of the amount of funds drawn down, on the grounds that
it has invested in the completion of paperwork for the loan. The bank will also likely require an
annual audit of key accounts and asset balances to verify the company's financial situation is in
line with the bank's assumptions
Management by Exception - Answer The practice of examining the financial and operational
results of a business, and only brining issues to the attention of management if results represent
substantial differences from the budgeted or expected amount.
Master Budget - Answer The comprehensive planning document for the entire organization.
Tis includes the operating budgets and the financial budgets. It is typically presented in either a
monthly or quarterly format, and usually covers a company's entire fiscal year. An explanatory
test may be included, which explains the company's strategic direction, how the document will
assist in accomplishing specific goals, and the management actions needed to achieve the
budget.
, Participative budget - Answer A budgeting process under which those people impacted by a
budget are involved in the budget creation process. This bottom-up approach to budgeting
tends to create budgets that are more achievable than are top-down budgets that are imposed
on a company by senior management, with much less participation by employees. This
budgeting is also better for morale, and tends to result in greater efforts by employees to
achieve what they predicted in the budget. However, a budget that is purely this type, does not
take high-level strategic considerations into account, so management needs to provide
employees with guidelines regarding the overall direction of the company, and how their
individual departments fit into that direction. Budgets that are purely of this nature may also
include slack which inhibits the organization from achieving greater efficiency.
Profit Center - Answer A business segment whose manager has responsibility for both cost
and revenue. Like a cost center, this type of unit does not have responsibility for the assets it
uses. Managers of these units are often evaluated by comparing actual profit to targeted or
budgeted profit. Segmented income statements should be used to evaluate the performance of
managers in this unit
Responsibility Accounting - Answer A system of evaluating the performance of each
responsibility center and its manager
Responsibility Center - Answer Any part of an organization whose manager has control over
cost, revenue, or investment funds
Revenue Center - Answer Unit within an organization for which the manager is only
responsible for generating revenues
Rolling Budget - Answer A budget that is continuously updated so that the next 12 months of
operations are always budgeted; also known as continuous budget
Safety Stock - Answer An additional quantity of items held in inventory in order to minimize
the chance of an item being out of stock
Sensitivity Analysis - Answer A what-if technique that asks what a result will be if a predicted
amount is not achieved or if an underlying assumption changes
Slack - Answer The intentional overstatement of budgeted expenses and/or understatement
of budgeted revenues in order to cope with uncertainty, make performance appear better, or
make room for potential budget cuts
and Correct Answers 2025-2026
Updated.
Budget Committee - Answer A group of upper managers who are responsible for overall policy
matters relating to the budget program and for coordinating the preparation of the budget and
its final review approval
Cost Center - Answer A business unit that is only responsible for the costs that it incurs. The
manager of this unit is not responsible for revenue generation or asset usage. The performance
of this unit is usually evaluated through the comparison of budgeted to actual costs
Financial Budgets - Answer The budgets that project the collection and payment of cash, as
well as forecast the company's budgeted balance sheet
Investment Center - Answer A business unit within an entity that has responsibility for its own
revenue, expenses, and assets. Management evaluates the unit based on its return on those
assets invested specifically in that unit
Line of Credit - Answer A commitment from a lender to pay a company whenever it needs
cash, up to a pre-set maximum level. It is generally secured by company assets, and for that
reason, bares an interest rate not far above the prime rate. The bank will typically charge an
annual maintenance fee, irrespective of the amount of funds drawn down, on the grounds that
it has invested in the completion of paperwork for the loan. The bank will also likely require an
annual audit of key accounts and asset balances to verify the company's financial situation is in
line with the bank's assumptions
Management by Exception - Answer The practice of examining the financial and operational
results of a business, and only brining issues to the attention of management if results represent
substantial differences from the budgeted or expected amount.
Master Budget - Answer The comprehensive planning document for the entire organization.
Tis includes the operating budgets and the financial budgets. It is typically presented in either a
monthly or quarterly format, and usually covers a company's entire fiscal year. An explanatory
test may be included, which explains the company's strategic direction, how the document will
assist in accomplishing specific goals, and the management actions needed to achieve the
budget.
, Participative budget - Answer A budgeting process under which those people impacted by a
budget are involved in the budget creation process. This bottom-up approach to budgeting
tends to create budgets that are more achievable than are top-down budgets that are imposed
on a company by senior management, with much less participation by employees. This
budgeting is also better for morale, and tends to result in greater efforts by employees to
achieve what they predicted in the budget. However, a budget that is purely this type, does not
take high-level strategic considerations into account, so management needs to provide
employees with guidelines regarding the overall direction of the company, and how their
individual departments fit into that direction. Budgets that are purely of this nature may also
include slack which inhibits the organization from achieving greater efficiency.
Profit Center - Answer A business segment whose manager has responsibility for both cost
and revenue. Like a cost center, this type of unit does not have responsibility for the assets it
uses. Managers of these units are often evaluated by comparing actual profit to targeted or
budgeted profit. Segmented income statements should be used to evaluate the performance of
managers in this unit
Responsibility Accounting - Answer A system of evaluating the performance of each
responsibility center and its manager
Responsibility Center - Answer Any part of an organization whose manager has control over
cost, revenue, or investment funds
Revenue Center - Answer Unit within an organization for which the manager is only
responsible for generating revenues
Rolling Budget - Answer A budget that is continuously updated so that the next 12 months of
operations are always budgeted; also known as continuous budget
Safety Stock - Answer An additional quantity of items held in inventory in order to minimize
the chance of an item being out of stock
Sensitivity Analysis - Answer A what-if technique that asks what a result will be if a predicted
amount is not achieved or if an underlying assumption changes
Slack - Answer The intentional overstatement of budgeted expenses and/or understatement
of budgeted revenues in order to cope with uncertainty, make performance appear better, or
make room for potential budget cuts
