QUESTION 27

1. Company R has produced the following variance analysis report. If Company R has a policy to investigate variances over 10% of the flexible budget, which variances should be investigated?

   	Actual	Flexible budget	Budget Variance		Price Variance		Quantity Variance
   DM	$324,240	$298,000	$26,240	U	$39,000	U	($12,760)	F
   DL	$215,580	$300,000	($84,420)	F	($13,000)	F	($71,420)	F
   VOH	$231,860	$249,000	($17,140)	F	$2,000	U	($19,140)	F

   		The direct materials price variance and the variable overhead efficiency variance.
   		The direct materials price variance and the direct labor efficiency variance.
   		The direct materials quantity variance and the variable overhead efficiency variance.
   		The direct labor rate variance and the direct labor efficiency variance.

2 points

QUESTION 28

1. Companies that elect to decentralize their operations must resolve issues relating to

   		the competency of the management of the divisions
   		the design of a measurement system that accurately reports on division performance.
   		the tendency of managers to sometimes make decisions that are suboptimal from the companys point of view.
   		all the above
   		none of the above

2 points

QUESTION 29

1. Residual income is defined as

   		contribution margin less controllable fixed costs.
   		variable contribution margin less the minimum rate of return on average operating assets.
   		controllable income less the minimum rate of return on average operating assets.
   		controllable margin divided by average operating assets.

2 points

QUESTION 30

1. Which of the following situations gives rise to the need for a transfer price?

   		None of the other answers
   		Two divisions of the same company sell to one another
   		Two divisions of the same company sell competing products to the same customer
   		Two divisions of the same company sell to the same wholesaler

2 points

QUESTION 31

1. Why is the statement of cash flows necessary?

   		Because investors and managers wanted information on how much cash went up or down in a period
   		Because investors and managers wanted additional information on why cash went up or down in a period
   		Because investors and managers needed information on the net profit of a period
   		Because the income statement is constructed using cash-basis accounting