Chapter 14

Depreciation on the office equipment would appear in which of the following budgets? A. Production budget. B. Manufacturing overhead budget. C. Operating expense budget. D. Cash budget.

Operating expense budget.

Which of the following items would be included in the operating expense budget? A. Sales commissions. B. Raw material purchases. C. Cash receipts. D. Cost of goods sold.

Sales commissions.

Which of the following is not an important factor to consider when preparing a sales forecast? A. the state of the economy. B. seasonal demand variations. C. a change in the management team. D. competitors' actions.

a change in the management team.

The budgeting process that most likely creates an attitude supportive of achieving organization goals is: A. top-down approach. B. zero based approach. C. proportionate increase approach. D. participative approach.

participative approach.

A cash budget would not include: A. sale of common stock. B. payment of dividends. C. payment of property taxes. D. plant and building depreciation.

plant and building depreciation.

A materials purchases budget must be completed immediately after the preparation of the: A. direct labor budget. B. operating expense budget. C. cash budget. D. production budget.

production budget.

An example of a committed cost is: A. employee training. B. manufacturing supplies. C. real estate taxes. D. charitable contributions.

real estate taxes.

The operating expense budget is based on the: A. sales budget. B. production budget. C. manufacturing overhead budget. D. cash budget.

sales budget.

Which of the following is the last budgeted financial statement to be prepared? A. Budgeted income statement. B. Budgeted balance sheet. C. Cash budget. D. It doesn't matter which one is prepared last.

Budgeted balance sheet.

Which of the following lists the components of the master budget in correct chronological order? A. Cash budget, budgeted income statement, budgeted balance sheet. B. Budgeted balance sheet, cash budget, budgeted income statement. C. Budgeted income statement, cash budget, budgeted balance sheet. D. It doesn't matter in which order they are prepared.

Budgeted income statement, cash budget, budgeted balance sheet.

Which of the following costs are included in the cost classification that is based on the time frame perspective? A. Variable cost and fixed cost. B. Direct cost and indirect cost. C. Product cost and period cost. D. Committed cost and discretionary cost.

Committed cost and discretionary cost.

___________ budgets are generally more expensive to maintain than single-period budgets because more time and effort is required in their preparation: A. Zero-based B. Continuous C. Discretionary D. Production

Continuous

Which of the following costs are included in the cost classification that is based on the relationship between total cost and volume of activity? A. Variable cost and fixed cost. B. Direct cost and indirect cost. C. Product cost and period cost. D. Committed cost and discretionary cost.

Variable cost and fixed cost.

Budget slack is: A. sometimes called padding or cushion. B. the result of budget estimates submitted that are slightly higher than what the costs are really expected to be. C. an allowance for contingencies built into a budget. D. all of these.

all of these.

The raw materials budgeted to be purchased for the period is equal to: A. ending inventory + raw material used - beginning inventory. B. ending inventory + ending inventory - raw material used. C. beginning inventory - ending inventory + raw material used. D. beginning inventory + raw material used - ending inventory.

ending inventory + raw material used - beginning inventory.

A budgeting approach that implies little or no input from lower levels of management is known as the: A. top-down approach. B. zero based approach. C. proportionate increase approach. D. participative approach.

top-down approach.

The concept of a standard used for planning and control purposes is most like a: A. measure of ideal performance. B. unit budget. C. measure of maximum efficiency. D. measure of historical performance.

unit budget.

Which of the following is not a strong reason for budgeting? A. Budgets provide a benchmark for judging performance. B. Budgeting requires little effort by non-accounting managers. C. Budgeting requires management to plan. D. Budgeting requires coordination among the functional areas of the firm.

Budgeting requires little effort by non-accounting managers.

The kind of standard that is most useful for planning and control is: A. an attainable standard. B. an ideal, or engineered, standard. C. a negotiated standard. D. a past experience standard.

an attainable standard.

A standard cost or production standard that is achievable under actual operating conditions is called a(n): A. attainable standard. B. ideal standard. C. past experience standard. D. average standard.

attainable standard.

Zero-based budgeting forces managers to: A. identify and prioritize the activities that are carried out in their departments. B. justify all of their expenditures for each budget period. C. both identify and prioritize the activities that are carried out in their departments and justify all of their expenditures for each budget period. D. none of these.

both identify and prioritize the activities that are carried out in their departments and justify all of their expenditures for each budget period.

Standard costs are used in which of the following phases of the management process? A. planning. B. control. C. organizing. D. both planning and control.

both planning and control.

Fixed costs classified according to the time frame perspective are known as: A. direct cost and indirect cost. B. constant and inconsistent cost. C. committed cost and discretionary cost. D. product cost and period cost.

committed cost and discretionary cost.

A cost that is incurred because of a long-range policy decision is known as a: A. discretionary cost. B. committed cost. C. continuous cost. D. standard cost.

committed cost.

Operating expenses are best budgeted on the basis of knowledge about: A. cost behavior patterns. B. relevant range. C. prior period actual expenses. D. current period budget amounts.

cost behavior patterns.

A key to estimating an accurate amount of cash to be collected from sales is: A. the accuracy of the sales forecast. B. the accuracy of the estimated collection patterns for sales. C. both the accuracy of the sales forecast and the accuracy of the estimated collection patterns for sales are keys. D. neither the accuracy of the sales forecast nor the accuracy of the estimated collection patterns for sales are keys.

both the accuracy of the sales forecast and the accuracy of the estimated collection patterns for sales are keys.

A standard cost or production standard that assumes maximum operating conditions and 100% efficiency at all times is called a(n): A. attainable standard. B. ideal standard. C. past experience standard. D. average standard.

ideal standard.

The cash budget is especially important to a firm when: A. there is not a lot of confidence in the sales forecast. B. it has a relatively large amount of operating cash. C. the P/E ratio has been trending downwards. D. it may have to negotiate a short-term bank loan.

it may have to negotiate a short-term bank loan.

An important reason for imposing a minimum cash balance in the cash budget is: A. it provides a cushion that can absorb forecast errors. B. it provides extra funds for managers to spend. C. it makes the balance sheet look better. D. all of these.

it provides a cushion that can absorb forecast errors.

A budget that is prepared for several periods in the future, then revised several times prior to the budget period is called a: A. rolling budget. B. zero-based budget. C. discretionary budget. D. single-period budget.

rolling budget.

The operating budget depends on key information developed in the: A. cash forecast. B. sales forecast. C. labor forecast. D. operating forecast.

sales forecast.

The key data element on which the entire budget is based is the: A. sales/revenue forecast. B. income statement budget. C. cash budget. D. balance sheet forecast.

sales/revenue forecast.

A budget that has been prepared only once prior to the budget period is called a: A. continuous budget. B. zero-based budget. C. discretionary budget. D. single-period budget.

single-period budget.

Standards are most appropriately used to: A. reward workers and managers who meet them. B. penalize workers and managers who do not meet them. C. calculate the unit cost of a product or service. D. support the planning and control processes of the firm.

support the planning and control processes of the firm.

Standards are likely to be most useful when expressed in: A. dollars per unit of input to the manufacturing process. B. quantities per unit of output from the process being evaluated. C. total costs for the accounting period for the department being evaluated. D. terms easily related to by the individual whose performance is being evaluated.

terms easily related to by the individual whose performance is being evaluated.

The development of the operating budget is complete when: A. the sales forecast for next year is complete. B. the budgeted cash flow statement is complete. C. the budgeted income statement is complete. D. the budgeted balance sheet is complete.

the budgeted balance sheet is complete.

The production budget uses all of the following except: A. the sales forecast. B. the inventory policy. C. the cash receipts budget. D. the beginning inventory quantity.

the cash receipts budget.

Standard costs are comprised of two elements: A. the quantity of input and the cost per unit of input. B. the quality of input and the cost per unit of input. C. the quantity of input and the cost per unit of output. D. the quality of input and the cost per unit of output.

the quantity of input and the cost per unit of input.

Developing a standard cost for a product or service will usually involve: A. efforts of cost accounting personnel only. B. focusing only on variable costs. C. the same kind of communication involved in the overall budgeting process. D. concentrating on historical costs and performance levels.

the same kind of communication involved in the overall budgeting process.

Once standard costs for products or services have been developed: A. they must be updated monthly to be useful. B. they can be used for more than planning and control purposes. C. they need not be revised unless the product or service is modified. D. performance reports must be issued if the standards are to be useful.

they can be used for more than planning and control purposes.

A budgeting process that involves justifying resource requirements based on an analysis and prioritization of organizational objectives is called: A. continuous budgeting. B. zero-based budgeting. C. discretionary budgeting. D. single-period budgeting.

zero-based budgeting.

Which of the following would not appear in the operating expense budget? A. Sales commissions. B. Delivery expense. C. Advertising. D. Depreciation on the production equipment.

Depreciation on the production equipment.

______________ standards allow inefficiencies from prior years to be incorporated into the budget, thus providing little incentive for improvement: A. Ideal B. Engineered C. Attainable D. Past experience

Past experience

Which of the following is a plan for acquiring the resources needed to complete the manufacturing activities that will satisfy the organization's sales forecast? A. Sales budget. B. Raw materials budget. C. Production budget. D. Direct labor budget.

Production budget.

Standard costing is developed and used for: A. planning purposes. B. control purposes. C. product costing purposes. D. all of these.

all of these.

Which of the following lists the components of the master budget in correct chronological order? A. Direct labor budget, production budget, cost of goods sold budget. B. Sales budget, production budget, cash budget. C. Sales budget, raw materials budget, production budget. D. Cash budget, production budget, manufacturing overhead budget.

Sales budget, production budget, cash budget.

What is the "key" to the entire operating budget? A. The forecast of operating activity. B. The budgeted income statement. C. The budgeted balance sheet. D. The production/purchases budget.

The forecast of operating activity.