14 Abel Company produces tree versions of besetall bats wood. aluminum, and hard

Question

14 Abel Company produces tree versions of besetall bats wood. aluminum, and hard nubber. A condensed segmentied income stanement for a necent percd allows $500.000 $200.000 e5 000 $765.000 175.000 50 000 7.000 242.000 Fixed expenses Net income (loss) Assume all of the fxed expenses for the hard nubber line are avoidable. What will be total net income if the line is droppec? a. $125,000 $103,000 105000d $140.000 15. On the basis of the budget reports, a. management analyzes differences between actual and planned results b. management may take corrective action c. management may modity the future plans d. All of these answers are correct. 16. A static budget is appropriate in evaluating a managers performance if master budget activity a. actual activity closely approximates b. actual activity is less than the master budget activity. c. the company prepares reports on an annual basis d. the company is a not-for-profit organization Top management's reaction to a difference between budgeted and actual sales often depends on a. whether the diference is favorable or unfavorable b. whether management anticipated the difference the materiality of the difference. d the personality of the top managers. intersects the vertical axis at $30,000. At 15,000 direct labor hours, a horizontal line drawn from the total budgeted cost line intersects variable costs may be expressed as: a. $30,000 fixed plus $4 per direct labor hour variable. b. $30,000 fixed plus $6 per direct labor hour variable c. $60,000 fixed plus $2 per direct labor hour variable. d. $60,000 fixed plus $4 per direct labor hour variable. the vertical axis at $90,000. Fixed and 19. A cost is considered controllable at a given level of managerial responsibility if a. the manager has the power to incur the cost within a given time period b. the cost has not exceeded the budget amount in the master budget c. it is a variable cost, but it is uncontrollable if it is a fixed cost d it changes in magnitude in a flexible budget. PAGE 5

Explanation / Answer

14 Total Net Income if Hard Rubber line is dropped $ Net Income of Wood Segment 100000 Net Income of Aluminium Segment 25000 Total Income 125000 Answer is A)$1,25,00 15 Budget report is an report used by management to compare the estimated/ budgeted projections with the actual performance number achieved during a period. Budget report is designed to compare how close the budgeted performance was to the actual performance during an accounting period Thus On the basis of Budger Report management analyzes differences between actual and planned results, management may take corrective action, management may modify the future plans. Answer is D) All of the above 16 a static budget shows planned results at the original budgeted activity level A static budget is appropriate in evaluating a manager's performance if actual activity closely approximates the master budget activity Answer is (A) 17 Top management's reaction to a difference between budgeted and actual sales often depends on the materiality of the difference. if the difference betwee the two is immaterial, the management will not react. 18 (90000-30000$)/15000 hrs $4 per direct labour hr ANSWER is (A) 19 ANSWER IS (A) . Cost is controllable atgiven level of managerial responsibility if th e manager has the power to incur th ecost within giventime period Majority of the cost are controllable by management because of the broad range of its activityresponsibility because of the manager’s decreasing authority.

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