ACC 241 – Managerial Accounting Exam Questions and Answers (Budgeting, Variance Analysis, Responsibility Centers)

Description: This document contains a complete set of ACC 241 exam questions with 100% correct answers. The material covers budgeting concepts such as master budgets, rolling budgets, zero-based budgeting, and financial vs. operating budgets. It also explains responsibility centers, variance analysis, balanced scorecard, and strategic planning tools. This resource is updated and provides verified answers to help with exam preparation. Budget Committee - answerA 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 and approval. Cost Center - answerA cost center is a business unit that is only responsible for the costs that it incurs. The manager of a cost center is not responsible for revenue generation or asset usage. The performance of a cost center is usually evaluated through the comparison of budgeted to actual costs. Cost of Goods Sold, Inventory and Purchases Page1 Budget - answerA merchandiser's budget that computes the Cost of Goods Sold, the amount of desired ending inventory, and amount of merchandise to be purchased. Financial Budgets - answerThe budgets that project the collection and payment of cash, as well as forecast the company's budgeted balance sheet. Investment Center - answerA business unit within an entity that has responsibility for its own revenue, expenses, and assets. Management evaluates the investment center based on its return on those assets invested specifically in the investment center. Line of Credit - answerA 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 bears an interest rate not far above the prime rate. Management by Exception - answerThe practice of examining the financial and operational results of a business, and only bringing issues to the attention of management if results represent substantial differences from the budgeted or expected amount. Master Budget - answerThe comprehensive planning document for the entire organization. The master budget includes the operating budgets and the financial budgets. Operating Budgets - answerThe budgets needed to run the daily operations of the company. The operation budgets culminate in a budgeted income statement. Participative Budget - answerA 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 Page2 company by senior management Profit Center - answerA business segment whose manager has responsibility for both cost and revenue. Like a cost center, a profit center does not have responsibility for the assets it uses. Segmented income statements Responsibility Accounting - answersystem of evaluating the performance of each responsibility center and its manager. Responsibility Center - answerAny part of an organization whose manager has control over cost, revenue, or investment funds. Revenue Center - answerUnit within an organization for which the manager is only responsible for generating revenues. Rolling Budget - answerA budget that is continuously updated so that the next 12 months of operations are always budgeted; also known as a continuous budget. Safety Stock - answerAn additional quantity of items held in inventory in order to minimize the chance of an item being out of stock. Sensitivity Analysis - answerA "What -if" technique that asks what results will be if actual prices or costs change or if an underlying assumption changes. Slack - answerThe 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. Strategic Planning - answerAn organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. The planning time frame typically extends 5 - 10 years into the future. Variance - answerThe difference between actual and budgeted amounts for revenues and expenses. Zero-based Budgeting - Page3 answerA system of budgeting where each department or division of a company must justify all expenditures and allocations rather than simply increases over the previous fiscal year. Balanced Scorecard - answerA strategic management system based upon measuring key performance indicators across all aspects and areas of an enterprise: financial; customer; internal process; and learning and growth. Benchmarking - answerComparing actual performance to similar companies in the same industry, to other divisions, or to world-class standards. Capital Turnover - answerThe amount of sales revenue generated for every dollar of invested assets; a component of the ROI calculation computed as sales divided by total assets. Centralized - answerRefers to an organizational structure where all major planning decisions are made by top management. Cost