Question

When evaluating its monthly performance, the managers of Drury Corporation decide to direct their attention only to those activities that deviated from their budgeted amounts. They are therefore engaging in:

Just-in-time management

Activity-based management

Organization-based management

Management by exception

Budgetary slack refers to:

Overspending the budget allowance

The time lag between budget preparation and actual operations.

Intentionally manipulating the budget to make it easier to meet its expectations

The time lag between budget discussions and actual preparation of budgets

Which of the following items should not be considered as a component of the cash budget?

Selling Expenses

Depreciation Expense

Administrative Expense

Interest Expense

Which of the following costs is best classified as fixed costs with respect to volume?

Parts used in manufacturing digital cameras

Electricity used to heat, light, and cool a hospital

Depreciation of a copy machine in the Human Resource Department

Salaries of quality inspectors in a production facility

Answer 1

1

Directing their attention only to those activities that deviated from their budgeted amounts is Management by exception

Under Management by exception, only those activities are examined which are different from budget amounts

Option D is correct

2

Budgetary slack refers to Intentionally manipulating the budget to make it easier to meet its expectations

It can be done by underestimating revenues or overestimating expenses

Option C is correct

3

Depreciation Expense should not be considered as a component of the cash budget

Option B is correct

4

Depreciation of a copy machine in the Human Resource Department is fixed cost with respect to volume

Option C is correct