ACC 241 Exam 3 ASU questions with
complete solutions
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
complete solutions
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
