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1 Question 6: Multiple Choice (8 marks) 2 3 1. What is the purpose of determining return on investment? 4 a) to assess a company's segment margin 5 b) to assess performance of an investment centre 6 e) to determine which costs are traceable 7 d) to determine profitability of a profit centre 8 2. Which one of the following is true concerning a static budget? 9 a) It is prepared at the end of the accounting period once actual results are known. 10 b) It shows planned results at the original budgeted activity level. 11 c) It is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs. 12 d) It reflects the level of activity at which the company will be most profitable. 3. Which one of the following expenses would most likely appear on a Selling and 13 Administrative Expense Budget? 14 a) indirect materials 15 b) machine depreciation 16 c) indirect labour 17 d) sales commissions 18 4. Why is the sales budget the single most important source in preparing budgets? 19 a) It is the only budget that requires estimates. 20 b) It enables the company to determine the unit cost of products. 21 c) It is the best determination of profitability of a company. 22 d) All the other budgets depend on it. 23 5. When is a cost considered to be controllable/traceable? 24 a) only when the manager has the power to incur the cost within a given time period 25 b) only if the cost is less than the budget amount 26 c) only when it is a variable cost