CH8a

The budgeted income statement does NOT rely on information from the Blank______ budget. Multiple choice question. ending finished goods inventory production selling and administrative expense sales

production The budgeted income statement estimates net income for the budget period and relies on information from the sales budget, ending finished goods inventory budget, selling and administrative expense budget, and cash budget. The final schedule of the master budget is the balance sheet, which estimates a company's assets, liabilities, and stockholders' equity at the end of a budget period.

Both the production and selling and administrative expense budgets are prepared using information directly from the _____________________ budget.

sales

In a manufacturing company, the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget are all based on the ____________________ budget.

production

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget? Multiple choice question. Selling and administrative Sales Production Direct labor

Production

In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget? Multiple choice question. Production Cash Sales Finished goods inventory

Production NOT: Cash Reason: The cash budget presents the inflows and outflows of cash. Sales Reason: The sales budget must be completed first, but it is not the budget that is looked at for materials, labor and overhead. Finished goods inventory Reason: The ending finished goods inventory budget computes the cost of unsold units.

A detailed plan for the future that is usually expressed in formal quantitative terms is Blank______. Multiple choice question. profit planning a budget responsibility accounting the budget period

a budget NOT: profit planning Reason: Profit planning is a process used by businesses to achieve their planned levels of profits by preparing a number of budgets that together form an integrated business plan known as the master budget. responsibility accounting Reason: Responsibility accounting is the idea that a manager should be held responsible for only those items they can actually control. the budget period Reason: The budget period is the length of time a budget should cover.

Select all that apply Involving lower-level managers increases Blank______ in the budgeting process. Multiple select question. accuracy strategic vision accountability motivation

accuracy accountability motivation NOT: strategic vision Reason: Top-level managers bring strategic vision to the budgeting process.

Select all that apply Master budget schedules Blank______. Multiple select question. may be prepared in any order are based on estimates and assumptions answer several key questions for a company

are based on estimates and assumptions answer several key questions for a company NOT: may be prepared in any order Reason: The master budget follows a specific sequence, starting with the sales budget.

When a manager creates a budget that is too easy to attain, Blank______ occurs. Multiple choice question. perpetual budgeting participative budgeting budgetary slack self-imposted budgeting

budgetary slack

The final schedule of the master budget is the Blank______. Multiple choice question. cash budget sales budget budgeted income statement budgeted balance sheet

budgeted balance sheet

Select all that apply Challenging but highly achievable budget targets Blank______. Multiple select question. may increase the likelihood that managers will engage in undesirable behavior may increase commitment to the budget may help build manager confidence allow top-managers to pressure lower-mangers to meet the budget

may increase commitment to the budget may help build manager confidence NOT: may increase the likelihood that managers will engage in undesirable behavior Reason: Highly achievable targets reduce the likelihood that a manager will engage in undesirable behavior. allow top-managers to pressure lower-mangers to meet the budget Reason: This should never be done as it is leads to hostility and tension.

A budget that is prepared with the full cooperation of managers at all levels is a self-imposed or __________________ budget.

participative

Budgets are used for two distinct purposes: Blank______ and Blank______. Multiple choice question. planning; control executing; overseeing advising; consulting benchmarking; integrating

planning; control

Developing goals and preparing various budgets to achieve those goals is part of the process.

Planning

Select all that apply Which of the following budgets are directly based on information from the sales budget? Multiple select question. Selling & administrative expense Manufacturing overhead Production Direct materials

Selling & administrative expense Production NOT: Manufacturing overhead Reason: The overhead budget is based on the number of units to be produced, not sold. Direct materials Reason: The direct materials budget is based on the number of units to be produced, not sold.

Budgets Blank______. Multiple choice question. focus on what has happened in the past communicate management's plan throughout the organization primarily help managers with day-to-day emergencies

communicate management's plan throughout the organization NOT: focus on what has happened in the past Reason: A budget focuses on what management is expecting to happen in the future. primarily help managers with day-to-day emergencies Reason: This is not the primary reason a budget is prepared. Without a budget, managers would most likely encounter more day-to-day emergencies.

Gathering feedback to ensure that the plan is being followed is referred to as _______________.

control

Select all that apply Budgets Blank______. Multiple select question. encourage managers to think about and plan for the future and the budgeting process can uncover potential bottlenecks before they occur coordinate the activities of the entire organization by integrating the plans of its various parts provide each department with the same amount of money to spend, so that all departments are treated fairly define goals and objectives that can serve as benchmarks for evaluating subsequent performance

encourage managers to think about and plan for the future and the budgeting process can uncover potential bottlenecks before they occur coordinate the activities of the entire organization by integrating the plans of its various parts define goals and objectives that can serve as benchmarks for evaluating subsequent performance

Challenging but highly achievable budgets increase the likelihood that lower-level managers will engage in undesirable behavior to secure their desired compensation. True false question. True False

false NOT: True Reason: The opposite is true. These types of budgets decrease the likelihood of undesirable behavior.

The cash budget Blank______. Multiple choice question. uses information from the budgeted balance sheet and income statement is the first budget prepared in the master budget process is prepared near the end of the master budget process

is prepared near the end of the master budget process

More accurate estimates are generally the result of having profit targets set by Blank______. Multiple choice question. top-level managers front-line employees lower-level managers

lower-level managers

An integrated business plan that formally lays out the company's goals is called the Blank______ budget. Multiple choice question. sales profit planning self-imposed master

master NOT: sales Reason: A sales budget is a detailed budget showing the expected sales for the budget period. profit planning Reason: A profit planning budget refers to preparing a number of budgets that together form an integrated business plan. self-imposed Reason: A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels and could be associated with any type of budget.

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the _______________ budget.

master; static; planning any of the above are correct

With a top-down approach to budgeting, lower-level managers Blank______. Multiple choice question. tend to be more cooperative and committed may feel demoralized and resentful input their knowledge and opinions are not involved in the budgeting process

may feel demoralized and resentful NOT: are not involved in the budgeting process Reason: Lower-level managers use top-management targets to create their budgets

Select all that apply Limitations of self-imposed budgeting include Blank______. Multiple select question. a broad strategic perspective suboptimal budget recommendations budgetary slack unrealistic profit targets

suboptimal budget recommendations budgetary slack NOT: a broad strategic perspective Reason: The opposite is true. unrealistic profit targets Reason: This is a limitation of an imposed budget.

With a top-down approach to budgeting, profit targets are issued by Blank______. Multiple choice question. employees lower-level managers top-level managers the board of directors

top-level managers

Many of the schedules in a master budget are based on a variety of management estimates and assumptions. True false question. True False

true NOT: False Reason: Managers must make a number of estimates and assumptions when preparing a master budget.

Most companies rely solely on self-imposed budgeting when creating budgets. True false question. True False

False. Companies usually create budgets by relying on some combination of top-down budgeting and self-imposed budgeting.

The first step in the budgeting process is preparing the Blank______ budget. Multiple choice question. direct materials cash sales production

Sales NOT: direct materials Reason: The direct materials budget cannot be completed until a company knows how many items to produce. cash Reason: The cash budget requires input from many other budgets and is one of the last budgets prepared. production Reason: The sales budget helps determine how many units need to be produced, so it is prepared before the production budget.