Chp 7

When preparing a materials purchase budget, desired ending inventory is deducted from total needs of the period to arrive at materials to be purchased. True False

False

Self-imposed budgets are those that are prepared by top management and then assigned to other managers within the organization. True False

False

The beginning cash balance is not included on the cash budget because the cash budget deals exclusively with cash flows rather than with balance sheet amounts. True False

False

The cash budget is developed from the budgeted income statement. True False

False

A self-imposed budget or ________________ budget is a budget that is prepared with the full cooperation of managers at all levels. A. Perpetual B. Master C. Participative D. Responsibility

C

The usual starting point in budgeting is to make a forecast of cash receipts and cash disbursements. True False

False

Fairmont Inc. uses an accounting system that charges costs to the manager who has been delegated the authority to make decisions concerning the costs. For example, if the sales manager accepts a rush order that will result in higher than normal manufacturing costs, these additional costs are charged to the sales manager because the authority to accept or decline the rush order was given to the sales manager. This type of accounting system is known as: A. Responsibility accounting. B. Contribution accounting. C. Absorption accounting. D. Operational budgeting.

A

The budget or schedule that provides necessary input data for the direct labor budget is the: A. Raw materials purchases budget. B. Production budget. C. Schedule of cash collections. D. Cash budget.

B

The cash budget must be prepared before you can complete the: A. Production budget. B. Budgeted balance sheet. C. Raw materials purchases budget. D. Schedule of cash disbursements.

B

The materials purchase budget: A. Is the beginning point in the budget process. B. Must provide for desired ending inventory as well as for production. C. Is accompanied by a schedule of cash collections. D. Is completed after the cash budget.

B

The concept of responsibility accounting means that: A. Budgetary data should be reviewed and approved by the budget committee. B. Budgetary data should be reviewed and approved by all levels of management. C. An employee's performance should be evaluated only on those items under his or her control. D. An employee's performance should be evaluated only by his or her immediate supervisor.

C

The excess or deficiency of cash available over disbursements on the cash budget is calculated as follows: A. The beginning balance less the expected cash receipts less the expected cash disbursements. B. The cash available less the expected cash receipts plus the expected cash disbursements. C. The beginning balance plus the expected cash receipts less the expected cash disbursements. D. None of the above.

C

The master budget process usually begins with the: A. Production budget. B. Operating budget. C. Sales budget. D. Cash budget.

C

There are various budgets within the master budget. One of these budgets is the production budget. Which of the following BEST describes the production budget? A. It details the required direct labor hours. B. It details the required raw materials purchases. C. It is calculated based on the sales budget and the desired ending inventory. D. It summarizes the costs of producing units for the budget period.

C

Which of the following is not a benefit of budgeting? A. It uncovers potential bottlenecks before they occur. B. It coordinates the activities of the entire organization by integrating the plans and objectives of the various parts. C. It ensures that accounting records comply with generally accepted accounting principles. D. It provides benchmarks for evaluating subsequent performance.

C

In the merchandise purchases budget, the required purchases (in units) for a period can be determined by subtracting the beginning merchandise inventory (in units) from the budgeted sales (in units). True False

False

Budgets are used for planning rather than for control of operations. True False

False

In companies that have "no lay-off" policies, the total direct labor cost for a budget period is computed by multiplying the total direct labor hours needed to make the budgeted output of completed units by the direct labor wage rate. True False

False

In the manufacturing overhead budget, the non-cash charges (such as depreciation) are added to the total budgeted manufacturing overhead to determine the expected cash disbursements for manufacturing overhead. True False

False

A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm. True False

True

A self-imposed budget can be a very effective control device in an organization. True False

True

If the expected level of activity is appreciably above or below the company's present capacity, it may be desirable to adjust fixed costs in the budget. True False

True

In the selling and administrative budget, the non-cash charges (such as depreciation) are deducted from the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses. True False

True

One of the distinct advantages of a budget is that it can help to uncover potential bottlenecks before they occur. True False

True