Posted: April 24th, 2016

Which of the following is not a factor in explaining why the present value of a future dollar is less than one dollar?

Problem #5
Bane Accounting Services planned to charge its customers $120 per hour in 2007. The chief operating officer expected that the company would provide 40,000 hours of service to clients. However, the vice president for marketing argued that the actual number of hours might range from 36,000 to 44,000 hours. Bane’s standard variable cost is $65 per hour, and its standard fixed cost is $1,500,000.
Required: Prepare flexible budgets for 36,000, 40,000, and 44,000 hours.
Answer
36,000 hours 40,000 hours 44,000 hours
Revenue
Variable cost
Contribution margin
Less fixed costs
Net income

Problem #6
Most large organizations establish responsibility centers (sections, departments, divisions, etc.) in order to delegate decision-making authority to the individuals who are best suited to make decisions in those particular centers. Consider the following responsibility centers and classify each as most likely being a cost center, profit center, or investment center.

Responsibility Center Description Type of Responsibility Center
1) Atlanta office of an investment banking services firm
2) Birmingham location of a major retail furniture chain
3) Cadillac division of General Motors
4) Casting department of a small steel mill
5) Customer complaint center at Delta Airlines
6) Check clearing department in a bank operations center
7) Finishing department of a manufacturing plant that makes precision cutting instruments
8) Gulfstream Aerospace unit (maker of business jets) of General Dynamics Corporation
9) Home electronics division of Sony Corporation
10) Maintenance department in an automobile assembly plant
11) Medical diagnostic equipment unit of Hewlett Packard Company
12) Restaurant in a Macy’s department store

Problem #7
Choose the correct answer:

1 – The practice of delegating authority and responsibility is referred to as.

decentralization.
standard costing.
management by exception.
centralization of authority

2 – Contribution margin would be one of the most important measurements used in
evaluating the performance of a

cost center.
profit center.
organizational center
Investment Center

3 – A budget prepared at a single volume of activity is referred to as a

strategic budget.
static budget.
standard budget.
flexible budget

4 – All of the following are capital investments except

Purchasing $40,000 of machinery
Buying a $4,000,000 manufacturing plant
Acquiring $400,000 of common stock
Paying $500,000 to renovate a retail store

10 – Which of the following is not a factor in explaining why the present value of a future
dollar is less than one dollar?

Inflation
Interest
Historical cost
Risk of failure to collect