Module 21

Question 1

Which of the following is a suggested technique for managing the budgeting process in a manner that increases employee motivation?
A. Measure the budget against performance only when assessing poor performers
B. Never alter the budget
C. Top management should disassociate itself from the budget
D. Emphasize the budget as a planning device

Answer 1

. Emphasize the budget as a planning device

Question 2

For budgets to be successful, managers should do all of the following except:
A. Encourage wide participation by all management levels
B. Use budget performance reports to identify both good and poor performance
C. Emphasize the importance of budgeting as a planning device to the employees
D. Emphasize the importance of meeting the budget in order to receive performance raises

Answer 2

Emphasize the importance of meeting the budget in order to receive performance raises

Question 3

Which of the following aspects related to budgeting and human behavior is not correct?
A. Budgets often produce strong reactions in people.
B. Line managers will not respect the budget if they perceive a lack of commitment by top management.
C. A disadvantage of the use of budgets is that they always decrease employee motivation.
D. Personnel who do not participate in budget preparation are likely to lack a commitment in achieving their part of the budget.

Answer 3

A disadvantage of the use of budgets is that they always decrease employee motivation.

Question 4

Budgetary slack refers to:
A. Intentionally requesting more funds in the budget than needed
B. The time lag between budget preparation and actual operations.
C. Overspending the budget allowance
D. The time lag between budget discussions and actual preparation of budgets

Answer 4

Intentionally requesting more funds in the budget than needed

Question 5

T/F: A top-down approach to budgeting involves little participation in the budget process by lower level managers and employees.

Answer 5

True

Question 6

T/F: Life-cycle budgeting is based on a moving time frame that extends over a fixed period.

Answer 6

False

Question 7

Which of the following budgets for a manufacturing firm indicates the raw materials that must be acquired to meet production needs and ending inventory requirements?
A. The sales budget
B. The production budget
C. The purchases budget
D. The manufacturing disbursements budget

Answer 7

The purchases budget

Question 8

In a manufacturing setting, the purchase budget is based on:
A. The sales budget
B. The production budget
C. The manufacturing labor budget
D. The cash disbursements

Answer 8

The production budget

Question 9

Which of the following items is not typically considered in the development of the cash budget?
A. Selling expenses
B. Depreciation Expense
C. Administrative expenses
D. Purchases

Answer 9

Depreciation Expense

Question 10

Generally, the budgeting process concludes with the preparation of the:
A. Cash budget
B. Production budget
C. Selling expense budget
D. Budgeted financial statements

Answer 10

Budgeted financial statements

Question 11

Generally, the first of the following budgets to be prepared is the:
A. Cash budget
B. Operations budget
C. Sales budget
D. Purchases budget

Answer 11

Sales budget

Question 12

Which of the following statements about budgeted financial statements is not true?
A. Budgeted financial statements need to adhere to the same format as the audited financial statements.
B. Development of budgeted financial statements is facilitated by spreadsheet programs.
C. Budgeted financial statements reflect the results of operations assuming all budgeted predictions are correct.
D.Budgeted financial statements are hypothetical.

Answer 12

Budgeted financial statements need to adhere to the same format as the audited financial statements.

Question 13

T/F: A budget that summarizes all receipts and disbursements expected to occur during the budget period is called a receipts and disbursements budget.

Answer 13

False

Question 14

T/F: The most appropriate and commonly followed sequences of preparing budget schedules is to prepare the Sales Budget, followed by the production budget, followed by the purchases budget.

Answer 14

True

Question 15

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ budgets cut across functional areas to bring together all budgeted costs for processes, products, or other cost objectives.
A. Master
B. Activity-based
C. Cash
D. Capital

Answer 15

Activity-based

Question 16

Which of the following statements concerning zero-based budgeting is true?
A. Zero-based budgeting specifies that every line item must be rounded to the nearest thousand dollar increment.
B. Zero-based budgeting specifies that every expenditure must be justified.
C. Zero-based budgeting is a variation of the incremental approach.
D. Zero-based budgeting is mainly used to assess research and development departments and similar departments where the relationship between inputs and outputs is weakest.

Answer 16

Zero-based budgeting specifies that every expenditure must be justified.

Question 17

Which budgeting approach is widely used in government and non-profit organizations?
Which budgeting approach is widely used in government and non-profit organizations?

Answer 17

The incremental approach

Question 18

Which budgeting approach is used most often for service, manufacturing, and distribution activities where there exists a clearly defined relationship between effort and accomplishment?
A. The continuous budgeting approach
B. The input/output approach
C. The activity based approach
D. Participation budgeting

Answer 18

The input/output approach

Question 19

Which budgeting approach seeks to reduce expenditures on a monthly basis?
A. The continuous improvement approach
B. The input/output approach
C. The activity based approach
D. Participation budgeting

Answer 19

The continuous improvement approach

Question 20

Which of the following statements concerning the minimum level approach to budgeting is true?
A. The minimum level approach to budgeting establishes a base amount for all budget items and requires explanation or justification for any budgeted amount above that level.
B. The minimum level approach to budgeting budgets physical inputs and costs as functions of planned activity.
C. The minimum level approach to budgeting budgets costs for a coming period as a dollar or percentage change from the amount budgeted or spent in some previous period.
D. The minimum level approach to budgeting has been more widely used in government than in business organizations

Answer 20

The minimum level approach to budgeting establishes a base amount for all budget items and requires explanation or justification for any budgeted amount above that level.

Question 21

Which of the following statements concerning an incremental budget is true?
A. An incremental budget has revenues and expenditures assigned to specific categories and items of responsibility.
B. An incremental budget begins with the premise that every dollar of budgeted expenditure must be justified.
C. An incremental budget is often used where the relationships between inputs and outputs are weak or nonexistent.
D. An incremental budget has revenues and expenditures allocated to general areas.

Answer 21

An incremental budget is often used where the relationships between inputs and outputs are weak or nonexistent.

Question 22

T/F: All type of Operations budgeting emphasizes activities performed, rather than traditional expense categories?

Answer 22

False

Question 23

T/FA more traditional budget would emphasize expense categories such as salaries, office supplies, and maintenance, while an activity-based budget would emphasize activities performed.

Answer 23

True

Question 24

T/F: All type of Operations budgeting emphasizes activities performed, rather than traditional expense categories?

Answer 24

False

Question 25

T/F: A more traditional budget would emphasize expense categories such as salaries, office supplies, and maintenance, while an activity-based budget would emphasize activities performed.

Answer 25

True

Question 26

T/F: The incremental approach to budgeting establishes a base amount for all budget items and requires explanation or justification for any budgeted amount above that level.

Answer 26

False

Question 27

The input/output approach to budgeting budgets physical inputs and costs as a function of planned activity.

Answer 27

True

Question 28

When management directs attention only to those activities not proceeding according to plan, they are engaging in:
A. Activity-based management
B. Organization-based management
C. Management by exception
D. Just-in-time management

Answer 28

Management by exception

Question 29

Budgets improve \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_ and \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_.
A. Communication; profits
B. Information; revenues
C. Revenues; profits
D. Communication; coordination

Answer 29

Communication; coordination

Question 30

The ability to move from an informal “reaction” style of management to a formal “proactive” style is one of the primary direct results of:
A. Formal budgeting
B. Specialty training
C. Ethics
D. Hiring outside consultants

Answer 30

Formal budgeting

Question 31

Evaluating plans and budgets in comparison with actual activities is directly related to:
A. Cost control
B. Planning
C. Financial analysis
D. Control

Answer 31

Control

Question 32

Which of the following factors is not an advantage of preparing operating budgets?
A. Improved communications
B. Improved basis of performance evaluation
C. Increased employee loyalty
D. Improved planning

Answer 32

Increased employee loyalty

Question 33

T/F: An operating budget is a prediction of expected revenues and expenses and other operating and financing transactions for a future period.

Answer 33

True

Question 34

T/F: The traditional justifications of budgeting include improved communications, improved planning, and improved sales.

Answer 34

False