QUESTION 4

Guardian Corporation has two major divisions Healthcare Products and Pharmaceutical Products. It provides the following information for the year.

	Healthcare Division	Pharmaceutical Division
Net sales	$160,000	$1,750,000
Operating income	$46,000	$218,000
Average assets	$320,000	$5,540,000
Target rate of return	12.0%	12.0%

Calculate the residual income for the HealthcareDivision.

a		$114,000
b		$46,000
c		$7,600
d		$26,800

QUESTION 5

Which of the following statements is TRUE of the budgeting process?

a		It is a continuous process that encourages communication.
b		Managers and employees are motivated to accept the budget's goals because they enjoy having their work monitored and evaluated.
c		If a company carefully plans for its future, there will be no need to make modifications during the budget period.
d		It shows the actual performance of the business.

QUESTION 6

An intentional understatement of expected revenues or overstatement of expected expenses by managers in order to have a favorable performance evaluation is known as ________.

a		appropriation
b		benchmarking
c		budgetary slack
d		variance analysis

QUESTION 7

1. Bulldog, Inc. has budgeted sales for the first quarter of the next year to be 45,000 units. The inventory on hand at the beginning of quarter is 5000 units. The desired ending inventory is 3000 units. Calculate the budgeted production for the first quarter.

a		43,000 units
b		40,000 units
c		48,000 units
d		3000 units