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Question(s) / Instruction(s):

A static budget report is appropriate for

a)            evaluating a manager’s performance in controlling variable costs.

b)            fixed manufacturing costs and fixed selling and administrative expenses.

c)            variable costs and fixed costs.

d)            none of the above.


Question 12

The manufacturing overhead budget (1) provides the basis for computing the predetermined overhead rate for the year, and (2) is used in costing work in process and finished goods inventories. Is the above statement true for

a)            (1) only.

b)            (2) only.

c)            both (1) and (2).

d)            neither (1) nor (2).


Question 13

At 40,000 direct labor hours, the flexible budget for indirect labor is $160,000. If $172,000 of indirect labor costs is incurred at 44,000 direct labor hours, the flexible budget report should show the following difference for indirect labor.

a)            $12,000 favorable.

b)            $4,000 unfavorable.

c)            $4,000 favorable.

d)            $12,000 unfavorable.


Question 14      

Controllable fixed costs are deducted from the contribution margin to arrive at

a)            income from operations.

b)            net income.

c)            controllable margin.

d)            realized income.


Question 15      

The numerator in computing return on investment is

a)            controllable margin.

b)            average operating assets

c)            contribution margin.

d)            net assets.



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