Chapter 9-10 reading quizzes

A cost is considered controllable at a given level of managerial responsibility if the cost has not exceeded the budget amount in the master budget. it changes in magnitude in a flexible budget. the manager has the power to manage the cost within a given time period. it is a variable cost, but it is uncontrollable if it is a fixed cost.

the manager has the power to manage the cost within a given time period.

Which of the following statements about budget acceptance in an organization is true? The most widely accepted budget by the organization is the one prepared by the department heads. Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process. The most widely accepted budget by the organization is the one prepared by top management. Budgets are hardly ever accepted by anyone except top management.

Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process.

The accumulation of accounting data on the basis of the individual manager who has the authority to make day-to-day decisions about activities in an area is called static reporting. master budgeting. responsibility accounting. flexible accounting.

responsibility accounting.

A sales forecast plays a minor role in the development of the master budget. shows a forecast for the industry only. shows forecasts for the industry and for the firm. shows a forecast for the firm only.

shows forecasts for the industry and for the firm.

A static budget is useful in evaluating a manager's performance by comparing actual variable costs and planned variable costs. is changed only if the actual level of activity is different than originally budgeted. shows planned results at the original budgeted activity level. should not be prepared in a company.

shows planned results at the original budgeted activity level.

A major element in budgetary control is the preparation of long-term plans. the valuation of inventories. the comparison of actual results with planned objectives. approval of the budget by the stockholders.

the comparison of actual results with planned objectives.

Which of the following is not shown on one of the operating budgets? Selling and administrative expenses Cost of goods sold Sales Accounts receivable

Accounts receivable

A flexible budget can be prepared for which of the following budgets comprising the master budget? Sales. Overhead. Direct materials. All of these answers are correct.

All of these answers are correct.

What amounts appear on a flexible budget? Actual costs for the budgeted activity level. Actual costs for the estimated activity level. Budgeted amounts for the actual activity level achieved. Original budgeted amounts at the static budget activity level.

Budgeted amounts for the actual activity level achieved.

Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable? Department managers should be held accountable for all variances from budgets for their departments. Department managers should be credited for favorable variances even if they are beyond their control. Department managers' performances should not be evaluated based on actual results to budgeted results. Department managers should only be held accountable for controllable variances for their departments.

Department managers should only be held accountable for controllable variances for their departments.

Which one of the following budgets would be prepared for a manufacturer but not for a merchandiser? Cash budget Budgeted income statement Sales budget Direct labor budget

Direct labor budget

Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets? Direct materials cost Direct labor cost Variable manufacturing overhead Fixed manufacturing overhead

Fixed manufacturing overhead

Which one of the following is not a benefit of budgeting? It facilitates the coordination of activities. It provides assurance that the company will achieve its objectives. It provides definite objectives for evaluating performance. It requires all levels of management to plan ahead on a recurring basis.

It provides assurance that the company will achieve its objectives.

Which of the following is not a financial budget? Manufacturing overhead budget Cash budget Budgeted balance sheet Capital expenditure budget

Manufacturing overhead budget

The most common budget period is one year. three months. one month. six months.

One year

What is the primary difference between a static budget and a flexible budget? The static budget is constructed using input from only upper level management while a flexible budget obtains input from all levels of management. The static budget is prepared for a single level of activity while a flexible budget is adjusted for different activity levels. The static budget includes only fixed costs while the flexible budget includes only variable costs. The static budget is prepared only for units produced while a flexible budget reflects the number of units sold.

The static budget is prepared for a single level of activity while a flexible budget is adjusted for different activity levels.

Which is true of budgets? They are used in the planning, but not in the control process. There is a standard form and structure for budgets. They are used in performance evaluation. They are voted on and approved by stockholders.

They are used in performance evaluation.

Why are budgets useful in the planning process? They guarantee the company will be profitable if it meets its objectives. They provide management with information about the company's past performance. They enable the budget committee to evaluate the performance of employees. They help communicate goals and provide a basis for evaluation.

They help communicate goals and provide a basis for evaluation.

Budget reports should be prepared daily. monthly. weekly. as frequently as needed.

as frequently as needed.

As one moves up to each higher level of managerial responsibility, a greater number of costs are controllable. the responsibility for cost incurrence diminishes. fewer costs are controllable. performance evaluation becomes less important.

a greater number of costs are controllable.

The linens department of a large department store is not a responsibility center. an investment center. a cost center. a profit center.

a profit center.

The foreign subsidiary of a large corporation is not a responsibility center. a cost center. a profit center. an investment center.

an investment center.

The culmination of preparing operating budgets is the preparation of the cash budget. budgeted balance sheet. production budget. budgeted income statement.

budgeted income statement.

A common starting point in the budgeting process is motivating the sales force. a clean slate, with no expectations. expected future net income. past performance.

past performance.

The direct materials and direct labor budgets provide information for preparing the cash budget. manufacturing overhead budget. sales budget. production budget.

cash budget.

The maintenance department of a manufacturing company is a(n) cost center. investment center. segment. profit center.

cost center.

The equation for determining budgeted merchandise purchases is budgeted cost of goods sold + desired ending inventory - beginning inventory. production + desired ending inventory - beginning inventory. sales + beginning inventory - desired ending inventory. cost of goods sold + beginning inventory - desired ending inventory.

cost of goods sold + desired ending inventory - beginning inventory.

An appropriate activity index for a college or university for budgeting faculty positions would be the credit hours taught by a department. number of days in the school term. faculty hours worked. number of administrators.

credit hours taught by a department.

The purpose of the sales budget report is to control sales commissions. control selling expenses. determine whether sales goals are being met. determine whether income objectives are being met.

determine whether sales goals are being met.

When budgeted and actual results are not the same amount, there is a budget by-product. anomaly. error. difference.

difference.

It is important that budgets be accepted by division managers only. department heads only. supervisors only. division managers, department heads, and supervisors.

division managers, department heads, and superviors.

An overly optimistic sales budget may result in insufficient inventories. increases in selling prices late in the year. excessive inventories. increased sales during the year.

excessive inventories.

Accounting generally has the responsibility for administration of the budget. setting company goals. enforcing the budget. expressing the budget in financial terms.

expressing the budget in financial terms.

If costs are not responsive to changes in activity level, then these costs can be best described as variable. mixed. fixed. flexible.

fixed.

An unrealistic budget is more likely to result when it has been developed by all levels of management. is developed with performance appraisal usages in mind. has been developed in a bottom up fashion. has been developed in a top down fashion.

has been developed in a top down fashion.

The flexible budget eliminates the need for a master budget. is relevant both within and outside the relevant range. is prepared before the master budget. is a series of static budgets at different levels of activity.

is a series of static budgets at different levels of activity.

Within the relevant range of activity, the behavior of total costs is assumed to be curvilinear and upward sloping. linear to a point and then level off. linear and upward sloping. linear and downward sloping.

linear and upward sloping.

A budget period should be monthly. for a year or more. long-term. long enough to provide obtainable goals under normal business conditions.

long enough to provide obtainable goals under normal business conditions.

Management by exception means that material differences will be investigated. means that only unfavorable differences will be investigated. means that all differences will be investigated. causes managers to be buried under voluminous paperwork.

means that material differences will be investigated.

Top management's reaction to a difference between budgeted and actual sales often depends on whether management anticipated the difference. whether the difference is favorable or unfavorable. the personality of the top managers. the materiality of the difference.

the materiality of the difference.