chapter 10 assignment questions Flashcards
Budgets, by their very nature, create a negative effect on human behaviour within companies because they imply that management is trying to control
True
False
False
A sales budget should be prepared before the production budget
True
False
True
Companies can use either a predetermined overhead rate or a manufacturing overhead budget
True
False
False
The manufacturing overhead budget generally has separate sections for variable and fixed costs
True
False
True
In preparing the budgeted balance sheet, management should not be concerned if it does not balance since it does not reflect actual results
True
False
False
Budgets promote efficiency and serve as a deterrent to waste
True
False
True
The last step in the budgeting process is developing a sales forecast
True
False
False
The direct materials budget contains only quantity data so the purchasing department knows how much materials should be purchased
True
False
False
Companies that do not prepare cash budgets have significant cash deficiencies
True
False
False
The “bottoms-up” approach to budgeting is also referred to as which of the following?
a) zero-based budgeting
b) grassroots budgeting
c) participative budgeting
d) cooperative budgeting
c) participative budgeting
The budgeted amount of raw materials necessary for a period is computed by
a) subtracting the beginning inventory of raw materials from the materials necessary to meet the production budget.
b) subtracting the desired ending inventory of raw materials from the raw materials necessary to meet the production budget and adding that result to the beginning inventory of raw materials.
c) adding the desired ending inventory of raw materials to the raw materials necessary to meet the production budget.
d) adding the desired ending inventory of raw materials to the raw materials necessary to meet the production budget and subtracting the beginning inventory of raw materials.
d) adding the desired ending inventory of raw materials to the raw materials necessary to meet the production budget and subtracting the beginning inventory of raw materials.
Which of the following is not a benefit of budgeting?
a) It promotes efficiency.
b) It deters waste.
c) It is a basis for performance evaluation.
d) It assures the company that management will perform at a particular operational level.
d) It assures the company that management will perform at a particular operational level.
Which one of the following is necessary if a company expects its budget to be effective?
a) The company must be operating at less than capacity.
b) The budget period must cover more than one year.
c) The company’s organizational structure must be sound.
d) The company must have sufficient cash for operations.
c) The company’s organizational structure must be sound.
Which of the following individuals should accept the company’s budgets in order for the budgets to be most effective?
a) division managers and customers
b) department heads and division managers
c) supervisors and clerks
d) department heads and creditors
b) department heads and division managers
Which of the following approvals will make the most effective environment for budget acceptance?
a) The budget is prepared by top management.
b) The budget preparation contains input from all levels of management.
c) The budget is prepared by the department heads.
d) Acceptance has nothing to do with who prepares budgets.
b) The budget preparation contains input from all levels of management.
In many companies, who is assigned the responsibility for coordinating the preparation of the budget?
a) A budget committee.
b) The sales managers since the sales budget is the backbone of the master budget.
c) The company’s board of directors since they approve major corporate changes.
d) The company’s independent certified general accountants.
a) A budget committee.
Which one of the following is an advantage of using participative budgeting?
a) It is updated daily to reflect current activity.
b) It assures the company is operating at the activity level of the master budget.
c) It allows companies to compare the current with the previous year.
d) Lower level managers are more likely to perceive budgets as fair.
d) Lower level managers are more likely to perceive budgets as fair.
Which problem might be a result of an unrealistic budget?
a) profitable operations
b) reduced employee morale
c) favourable operating activity
d) minimal differences between actual and budgeted amounts
b) reduced employee morale
How does long-range planning compare to a master budget?
a) It focuses on meeting profit objectives instead of strategies to achieve those goals.
b) It is less detailed than an annual budget.
c) It is prepared by the president, unlike a master budget which is prepared by a budget committee.
d) It generally encompasses a shorter period of time than a master budget.
b) It is less detailed than an annual budget.
What three differences exist between long-range planning and budgeting?
a) amount of detail, content, and emphasis
b) time periods involved, amount of detail, and content
c) content, emphasis, and amount of detail
d) emphasis, time periods involved, and amount of detail
d) emphasis, time periods involved, and amount of detail
Which of the following is a proper match-up?
a) long-range planning -> 1 year
b) budgeting -> review of progress
c) budgeting -> anticipated trends in economic environment
d) long-range planning -> strategies
d) long-range planning -> strategies
Which one of the following best describes a master budget?
a) It is an interrelated long-term plan and operating budgets.
b) It includes financial budgets and a long-term plan.
c) It includes interrelated financial budgets and operating budgets.
d) It is all the accounting journals and ledgers used by a company.
c) It includes interrelated financial budgets and operating budgets.
What is the starting point in preparing a master budget?
a) the production budget
b) the sales budget
c) the direct labour budget
d) the purchases budget
b) the sales budget
Which one of the following sets of budgets are financial budgets?
a) budgeted balance sheet and production budget
b) budgeted income statement and sales budget
c) capital expenditure budget and cash budget
d) cash budget and sales budget
c) capital expenditure budget and cash budget
Which of the following is not a characteristic of bottom-up budgeting?
a) encourages organization-wide input into the process.
b) It takes advantage of employees’ intimate knowledge of operations when formulating plans.
c) It is not as time consuming as top-down budgeting.
d) It increases employees’ commitment to achieving budget goals.
c) It is not as time consuming as top-down budgeting.
Which one of the following helps improve the reliability of the sales forecast?
a) reduction of differences between actual and estimated amounts
b) creation of management awareness
c) consideration of industry trends
d) extension of the budget period
c) consideration of industry trends
Which of the following is correct regarding the manufacturing overhead budget?
a) The manufacturing overhead budget should include all costs of marketing and advertising.
b) The budget should show only indirect materials and indirect labour.
c) Manufacturing overhead costs should be broken down by cost behaviour.
d) Total budgeted manufacturing overhead should be calculated using a predetermined overhead rate.
c) Manufacturing overhead costs should be broken down by cost behaviour.
Indicate whether each budget is an operating or a financial budget
Budgeted balance sheet
Financial Budget
Indicate whether each budget is an operating or a financial budget
Capital expenditures budget
Financial Budget
Indicate whether each budget is an operating or a financial budget
Cash budget
Financial Budget
Indicate whether each budget is an operating or a financial budget
Direct labour budget
Operating budget
Indicate whether each budget is an operating or a financial budget
Direct materials budget
Operating budget
Indicate whether each budget is an operating or a financial budget
Budgeted income statement
Operating budget
Indicate whether each budget is an operating or a financial budget
Manufacturing overhead budget
Operating budget
Indicate whether each budget is an operating or a financial budget
Production budget
Operating budget
Indicate whether each budget is an operating or a financial budget
Sales budget
Operating budget
Indicate whether each budget is an operating or a financial budget
Selling and administrative expenses budget
Operating budget
