1-1-Direct fixed costs are classified as controllable by the CEO and top managem

Question

1-1-Direct fixed costs are classified as controllable by the CEO and top management but allocated fixed costs are not.
True or False
2-A flexible budget report compares actual results with budget data at the activity level presented in the master budget.
True or False
3-The responsibility report for a profit center uses a C-V-P format to report sales revenue minus variable costs as controllable margin.
True or False
4-Responsibility centers include investment centers, profit centers, and cost centers.

True or False

Explanation / Answer

1-1 True. Direct fixed costs of a division are classified as controllable because these costs can be eleminated by ending the operations of that division. However, allocated fixed costs cannot be eliminated even by discontinuing the operations of a division. Therefore, allocated fixed costs are uncontrollable.

2-False. A flexible budget is prepared on the basis of actual level of activity.

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