Quiz 6

True or False: To be most effective, budgets must be thought of as financial staff tools. A) True B) False

B) False

The following profit information was taken from Eastside Hospital's budget data: Simple budget $1,200,000 Flexible budget $1,000,000 Actual results $ 500,000 What is the simple profit variance? (Hint: An unfavorable variance is defined by a minus sign) A) -$200,000 B) -500,000 C) -$700,000 D) $500,000 E) $700,000

C) -$700,000

Which of the following statements about a flexible budget is most correct? A) A flexible budget uses realized (actual) prices along with all other original (simple) budget assumptions. B) A flexible budget uses realized (actual) labor costs along with all other original (simple) budget assumptions. C) A flexible budget uses realized (actual) supplies costs along with all other original (simple) budget assumptions. D) A flexible budget uses realized (actual) facilities costs along with all other original (simple) budget assumptions. E) A flexible budget uses realized (actual) volume along with all other original (simple) budget assumptions.

E) A flexible budget uses realized (actual) volume along with all other original (simple) budget assumptions.

Budgets are used for: A) Planning B) Communication C) Control D) both A & B E) A, B, & C

E) A, B, & C

True or False: A variance analysis using a flexible budget highlights changes that result from "managerial" factors as opposed to changes that result from volume forecast errors.

True

True or False: Small organizations may use a single operating budget in place of multiple budgets.

True

In budgeting, variance is: A) A measure of the degree of dispersion of a distribution about its mean value. B) The difference between a realized value and a budgeted, or standard, value. C) The percentage decrease in volume that can occur without causing the organization to lose money. D) The difference between operating profit and total profit E) The difference between total revenues and total costs.

B) The difference between a realized value and a budgeted, or standard, value.

Which of the following is not part of a business' strategic plan? A) Mission statement B) Values statement C) Goals D) Capital budget E) Objectives

D) Capital budget

True or False: The operating plan focuses on how a business plans to meet the goals and objectives contained in the strategic plan. A) True B) False

A) True

Which of the following statements about budgeting is incorrect? A) In the conventional approach, the prior budget is used as the starting point. B) In zero-based budgeting, the prior budget is adopted for the coming year with no changes C) All organizations use annual budgets, but most also use quarterly (or more frequent) budgets. D) Out-year budgets are used more for planning purposes than for control. E) Bottom-up budgets begin at the department level and then are approved by senior management.

B) In zero-based budgeting, the prior budget is adopted for the coming year with no changes