ACC 241 Exam 3 ASU Question and
answers verified to pass 2025/2026
Budget Committee - correct 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 - correct 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 - correct answer ✔The budgets that project the collection and payment of cash, as
well as forecast the company's budgeted balance sheet
Investment Center - correct 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 - correct 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 - correct 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 - correct 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.
Operating budgets - correct answer ✔The budgets needed to run the daily operations of the company,
culminate in a budgeted income statement
Participative budget - correct 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 - correct 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 - correct answer ✔A system of evaluating the performance of each
responsibility center and its manager
Responsibility Center - correct answer ✔Any part of an organization whose manager has control over
cost, revenue, or investment funds
Revenue Center - correct answer ✔Unit within an organization for which the manager is only
responsible for generating revenues
Rolling Budget - correct answer ✔A budget that is continuously updated so that the next 12 months of
operations are always budgeted; also known as continuous budget
answers verified to pass 2025/2026
Budget Committee - correct 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 - correct 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 - correct answer ✔The budgets that project the collection and payment of cash, as
well as forecast the company's budgeted balance sheet
Investment Center - correct 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 - correct 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 - correct 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 - correct 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.
Operating budgets - correct answer ✔The budgets needed to run the daily operations of the company,
culminate in a budgeted income statement
Participative budget - correct 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 - correct 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 - correct answer ✔A system of evaluating the performance of each
responsibility center and its manager
Responsibility Center - correct answer ✔Any part of an organization whose manager has control over
cost, revenue, or investment funds
Revenue Center - correct answer ✔Unit within an organization for which the manager is only
responsible for generating revenues
Rolling Budget - correct answer ✔A budget that is continuously updated so that the next 12 months of
operations are always budgeted; also known as continuous budget
