ACC 241 UPDATED EXAM EVALUATION QUESTIONS
AND ANSWERS SURE A+
✔✔What do companies use budgets for? - ✔✔To plan for the future and control
revenue and expenses.
✔✔Participative budgeting - ✔✔The participation of many levels of management.
✔✔What are the advantages to partcipative budgeting? - ✔✔- Managers are closer to
action so they have more knowledge in creating a more realistic budget
- They are more likely to accept and be motivated by the budgets that they create
✔✔What are some disadvantages to participative budgeting? - ✔✔- It can get time
consuming and complicated as more people participate
- Some managers may add in some slack by overbudgeting expense and
underbudgeting revenue
✔✔What are the advantages to budgeting? - ✔✔- It forces managers to plan for the
future
- It coordinates company activities
- Provides a benchmark to motivate employees and evaluate performances
✔✔Financial budget - ✔✔Includes capital expenditure budget and cash budget.
✔✔What is the formula to calculate the production budget? - ✔✔Units needed
+ Desired ending inventory
Total needed
- Beginning inventory
= Total production
✔✔Decentralize - ✔✔When the company splits their operations into different operating
segments.
✔✔What are the advantages to decentralization? - ✔✔- It frees up the managements
time so they can focus on long-term planning
- Encourages the use of expert knowledge
- Improves customer relations
- Provides training
- Improves motivation and retention
✔✔What is the formula to calculate ROI or return on investment? - ✔✔OPERATING
INCOME/TOTAL ASSETS
✔✔What is the formula to calculate the sales margin? - ✔✔OPERATING
INCOME/SALES
, ✔✔What is the formula to calculate the residual income? - ✔✔(OPERATING INCOME -
(TARGET RATE X TOTAL ASSETS)
✔✔What is the formula to calculate capital turnover? - ✔✔SALES/TOTAL ASSETS
✔✔Volume variance - ✔✔Is the difference between the flexible budget and actual
budget.
✔✔Flexible budget variance - ✔✔The differences between actual and flexible due to
something other than volume.
✔✔Balanced scorecard includes? - ✔✔- Financial
- Customer
- Internal
- Learning/growth
✔✔What is the formula to calculate direct materials price variance? - ✔✔ACTUAL
QUANTITY PURCHASED X (ACTUAL PRICE - STANDARD PRICE)
✔✔What is the formula to calculate direct materials quantity variance? - ✔✔STANDARD
PRICE X (ACTUAL USED - STANDARD QUANTITY ALLOWED)
✔✔What is the formula to calculate direct labor rate variance? - ✔✔ACTUAL HOURS X
(ACTUAL RATE - STANDARD RATE)
✔✔What is the formula to calculate the direct labor efficiency variance? -
✔✔STANDARD RATE X (ACTUAL HOURS - STANDARD HOURS ALLOWED)
✔✔Capital budgeting - ✔✔Acquiring assets that are used for long periods of time
usually for a large amount of money.
✔✔Payback period and accounting rate of return (ARR) works well with what kind of
investments? - ✔✔They work well with investments that has a short life span but doesn't
consider the time value of money.
✔✔Net present value (NPV) and internal rate of return (IRR) works well with what kind
of investments? - ✔✔They work well with investments that has longer life spans and
they do consider the time value of money.
✔✔ARR - ✔✔Indicates the profitability of investment with respect to its impact on
operating income.
✔✔Capital budgeting focuses on what? - ✔✔Cash inflows.
AND ANSWERS SURE A+
✔✔What do companies use budgets for? - ✔✔To plan for the future and control
revenue and expenses.
✔✔Participative budgeting - ✔✔The participation of many levels of management.
✔✔What are the advantages to partcipative budgeting? - ✔✔- Managers are closer to
action so they have more knowledge in creating a more realistic budget
- They are more likely to accept and be motivated by the budgets that they create
✔✔What are some disadvantages to participative budgeting? - ✔✔- It can get time
consuming and complicated as more people participate
- Some managers may add in some slack by overbudgeting expense and
underbudgeting revenue
✔✔What are the advantages to budgeting? - ✔✔- It forces managers to plan for the
future
- It coordinates company activities
- Provides a benchmark to motivate employees and evaluate performances
✔✔Financial budget - ✔✔Includes capital expenditure budget and cash budget.
✔✔What is the formula to calculate the production budget? - ✔✔Units needed
+ Desired ending inventory
Total needed
- Beginning inventory
= Total production
✔✔Decentralize - ✔✔When the company splits their operations into different operating
segments.
✔✔What are the advantages to decentralization? - ✔✔- It frees up the managements
time so they can focus on long-term planning
- Encourages the use of expert knowledge
- Improves customer relations
- Provides training
- Improves motivation and retention
✔✔What is the formula to calculate ROI or return on investment? - ✔✔OPERATING
INCOME/TOTAL ASSETS
✔✔What is the formula to calculate the sales margin? - ✔✔OPERATING
INCOME/SALES
, ✔✔What is the formula to calculate the residual income? - ✔✔(OPERATING INCOME -
(TARGET RATE X TOTAL ASSETS)
✔✔What is the formula to calculate capital turnover? - ✔✔SALES/TOTAL ASSETS
✔✔Volume variance - ✔✔Is the difference between the flexible budget and actual
budget.
✔✔Flexible budget variance - ✔✔The differences between actual and flexible due to
something other than volume.
✔✔Balanced scorecard includes? - ✔✔- Financial
- Customer
- Internal
- Learning/growth
✔✔What is the formula to calculate direct materials price variance? - ✔✔ACTUAL
QUANTITY PURCHASED X (ACTUAL PRICE - STANDARD PRICE)
✔✔What is the formula to calculate direct materials quantity variance? - ✔✔STANDARD
PRICE X (ACTUAL USED - STANDARD QUANTITY ALLOWED)
✔✔What is the formula to calculate direct labor rate variance? - ✔✔ACTUAL HOURS X
(ACTUAL RATE - STANDARD RATE)
✔✔What is the formula to calculate the direct labor efficiency variance? -
✔✔STANDARD RATE X (ACTUAL HOURS - STANDARD HOURS ALLOWED)
✔✔Capital budgeting - ✔✔Acquiring assets that are used for long periods of time
usually for a large amount of money.
✔✔Payback period and accounting rate of return (ARR) works well with what kind of
investments? - ✔✔They work well with investments that has a short life span but doesn't
consider the time value of money.
✔✔Net present value (NPV) and internal rate of return (IRR) works well with what kind
of investments? - ✔✔They work well with investments that has longer life spans and
they do consider the time value of money.
✔✔ARR - ✔✔Indicates the profitability of investment with respect to its impact on
operating income.
✔✔Capital budgeting focuses on what? - ✔✔Cash inflows.
