CHAPTER 22. Budgetary Planning Flashcards
Which of the following is not a benefit of budgeting?
a. Management can plan ahead.
b. An early warning system is provided for potential problems.
c. It enables disciplinary action to be taken at every level of responsibility.
d. The coordination of activities is facilitated.
c. It enables disciplinary action to be taken at every level of responsibility.
A budget:
a. is the responsibility of management accountants.
b. is the primary method of communicating agreed-upon objectives throughout an organization.
c. ignores past performance because it represents management’s plans for a future time period.
d. may promote efficiency but has no role in evaluating performance.
b. is the primary method of communicating agreed-upon objectives throughout an organization.
The essentials of effective budgeting do not include:
a. top-down budgeting.
b. management acceptance.
c. research and analysis.
d. sound organizational structure.
a. top-down budgeting.
Compared to budgeting, long-range planning generally has the:
a. same amount of detail.
b. longer time period.
c. same emphasis.
d. same time period.
b. longer time period.
A sales budget is:
a. derived from the production budget.
b. management’s best estimate of sales revenue for the year.
c. not the starting point for the master budget.
d. prepared only for credit sales.
b. management’s best estimate of sales revenue for the year.
The formula for the production budget is budgeted sales in units plus:
a. desired ending merchandise inventory less beginning merchandise inventory.
b. beginning finished goods units less desired ending finished goods units.
c. desired ending direct materials units less beginning direct materials units.
d. desired ending finished goods units less beginning finished goods units.
d. desired ending finished goods units less beginning finished goods units.
Direct materials inventories are kept in pounds in Byrd Company, and the total pounds of direct materials needed for production is 9,500. If the beginning inventory is 1,000 pounds and the desired ending inventory is 2,200 pounds, the total pounds to be purchased is:
a. 9,400.
b. 9,500.
c. 9,700.
d. 10,700.
d. 10,700.
9,500) + Desired ending inventory (2,200) − Beginning inventory (1,000
The formula for computing the direct labor budget is to multiply the direct labor cost per hour by the:
a. total required direct labor hours.
b. physical units to be produced.
c. equivalent units to be produced.
d. No correct answer is given.
a. total required direct labor hours.
Each of the following budgets is used in preparing the budgeted income statement except the:
a. sales budget.
b. selling and administrative expense budget.
c. capital expenditure budget.
d. direct labor budget.
c. capital expenditure budget.
The budgeted income statement is:
a. the end-product of the operating budgets.
b. the end-product of the financial budgets.
c. the starting point of the master budget.
d. dependent on cash receipts and cash disbursements.
a. the end-product of the operating budgets.
The budgeted balance sheet is:
a. developed from the budgeted balance sheet for the preceding year and the budgets for the current year.
b. the last operating budget prepared.
c. used to prepare the cash budget.
d. All of the above.
a. developed from the budgeted balance sheet for the preceding year and the budgets for the current year.
The format of a cash budget is:
a. Beginning cash balance + Cash receipts + Cash from financing − Cash disbursements = Ending cash balance.
b. Beginning cash balance + Cash receipts − Cash disbursements +/− Financing = Ending cash balance.
c. Beginning cash balance + Net income − Cash dividends = Ending cash balance.
d. Beginning cash balance + Cash revenues − Cash expenses = Ending cash balance.
b. Beginning cash balance + Cash receipts − Cash disbursements +/− Financing = Ending cash balance.
Expected direct materials purchases in Read Company are $70,000 in the first quarter and $90,000 in the second quarter. Forty percent of the purchases are paid in cash as incurred, and the balance is paid in the following quarter. The budgeted cash payments for purchases in the second quarter are:
a. $96,000.
b. $90,000.
c. $78,000
d. $72,000.
c. $78,000
Budgeted cash payments for the second quarter =
Purchases for the first quarter ($42,000; $70,000 × .60) + 40% of the purchases for the second quarter ($36,000; $90,000 × .40) = $78,000
The budget for a merchandiser differs from a budget for a manufacturer because:
a. a merchandise purchases budget replaces the production budget.
b. the manufacturing budgets are not applicable.
c. None of the above.
d. Both (a) and (b) above.
d. Both (a) and (b) above.
In most cases, not-for-profit entities:
a. prepare budgets using the same steps as those used by profit-oriented businesses.
b. know budgeted cash receipts at the beginning of a time period, so they budget only for expenditures.
c. begin the budgeting process by budgeting expenditures rather than receipts.
d. can ignore budgets because they are not expected to generate net income.
c. begin the budgeting process by budgeting expenditures rather than receipts
A formal written statement of management’s plans for a specified future time period, expressed in financial terms.
a. budget
b. cash budget
c. financial budget
d. long-range planning analysis
a. budget
The amount by which a manager intentionally underestimates budgeted revenues or overestimates budgeted expenses in order to make it easier to achieve budgetary goals.
a. long-range planning
b. budgetary slack
c. sales forecast
d. budgeted income statement
b. budgetary slack
A group responsible for coordinating the preparation of the budget.
a. finance department
b. master budget planners
c. budget committee
d. board of directors
c. budget committee
A projection of financial position at the end of the budget period.
a. budgeted balance sheet
b. budgeted income statement
c. financial budget
d. sales budget
a. budgeted balance sheet
An estimate of the expected profitability of operations for the budget period.
a. budgeted balance sheet
b. budgeted income statement
c. financial budget
d. sales budget
b. budgeted income statement
A projection of anticipated cash flows.
a. financial budget
b. cash budget
c. sales budget
d. master budget
b. cash budget
A projection of the quantity and cost of direct labor necessary to meet production requirements.
a. manufacturing overhead budget
b. master budget
c. direct materials budget
d. direct labor budget
d. direct labor budget
An estimate of the quantity and cost of direct materials to be purchased.
a. manufacturing overhead budget
b. master budget
c. direct materials budget
d. direct labor budget
c. direct materials budget
Individual budgets that focus primarily on the cash resources needed to fund expected operations and planned capital expenditures.
a. cash budgets
b. sales budgets
c. financial budgets
d. master budget
c. financial budgets
A formalized process of identifying long-term goals, selecting strategies to achieve those goals, and developing policies and plans to implement the strategies.
a. short-range planning
b. long-range planning
c. budgetary planning
d. sales planning
b. long-range planning
An estimate of expected manufacturing overhead costs for the budget period.
a. manufacturing overhead budget
b. master budget
c. direct materials budget
d. direct labor budget
a. manufacturing overhead budget
A set of interrelated budgets that constitutes a plan of action for a specific time period.
a. manufacturing overhead budget
b. master budget
c. direct materials budget
d. direct labor budget
b. master budget
A merchandise purchases budget is the estimated inventory to be purchased by a merchandiser to meet expected sales.
a. True
b. False
b. false
A merchandise purchases budget is the estimated COST OF GOODS to be purchased by a merchandiser to meet expected sales.
Individual budgets that result in a budgeted income statement.
a. production budgets
b. operating budgets
c. sales budgets
d. selling and administrative expense budgets
b. operating budgets
A budgetary approach that starts with input from lower-level managers and works upward so that managers at all levels participate.
a. managerial budgeting
b. participative budgeting
c. top-to-bottom budgeting
d. budget forecasting
b. participative budgeting
A projection of the units that must be produced to meet anticipated sales.
a. direct materials budget
b. direct labor budget
c. production budget
d. sales budget
c. production budget
An estimate of expected sales revenue for the budget period.
a. master budget
b. production budget
c. sales budget
d. selling budget
c. sales budget
The projection of potential sales for the industry and the company’s expected share of such sales.
a. sales budget
b. sales forecast
c. production forecast
d. selling budget
b. sales forecast
A projection of anticipated selling and administrative expenses for the budget period.
a. production budget
b. operating budget
c. sales budget
d. selling and administrative expense budget
d. selling and administrative expense budget
Which of the following are correct statements about a budget?
a. it is a formal written statement of management’s plans for a specified future time period.
b. it becomes an important basis for evaluating performance.
c. it promotes efficiency and serves as a deterrent to waste and inefficiency.
d. all of these options are correct statements.
d. all of these options are correct statements.
The role of budgeting is considered a control device?
a. true
b. false
a. true
The most common budget period is:
a. one week
b. one month
c. one quarter
d. one year
d. one year
The master budget contains which two classes of budgets:
a. sales budgets and financial budgets
b. production budgets and operating budgets
c. operating budgets and financial budgets
d. production budgets and operating budgets
c. operating budgets and financial budgets
The manufacturing overhead budget distinguishes between variable and fixed overhead costs.
a. true
b. false
a. true
