Act 3020 Chapter 21-No Math

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

a. Direct labor budget

Which of the following is done to improve the reliability of the sales forecast? a. Employ financial planning models b. Lengthen the planning horizon to more than a year c. Rely solely on outside consultants d. Use the sales forecasts from the previous year

a. Employ financial planning models

Which of the following would not appear as a fixed expense on a selling and administrative expense budget? a. Freight-out b. Office salaries c. Property taxes d. Depreciation

a. Freight-out

Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities will prepare? a. Orange Co. will prepare a production budget, and Pineapple Company will prepare a merchandise purchases budget. b. Orange Co. will prepare a sales forecast, and Pineapple Company will prepare a sales budget. c. Pineapple Company will prepare a production budget, and Orange Co. will prepare a merchandise purchases budget. d. Both companies will prepare the same types of budgets.

a. Orange Co. will prepare a production budget, and Pineapple Company will prepare a merchandise purchases budget.

Budgeting is usually most closely associated with which management function? a. Planning b. Directing c. Motivating d. Controlling

a. Planning

Which is the last step in developing the master budget? a. Preparing the budgeted balance sheet b. Preparing the cost of goods manufactured budget c. Preparing the budgeted income statement d. Preparing the cash budget

a. Preparing the budgeted balance sheet

Which of the following statements about a budgeted income statement is not true? a. The budgeted income statement is prepared after the financial budgets are prepared. b. The budgeted income statement is prepared on the accrual basis of accounting. c. The budgeted income statement can be prepared in a multiple-step format. d. The budgeted income statement is prepared using the individual operating budgets.

a. The budgeted income statement is prepared after the financial budgets are prepared.

The responsibility for expressing management's budgeting goals in financial terms is performed by the a. accounting department. b. top management. c. lower level of management. d. budget committee.

a. accounting department.

The important end-product of the operating budgets is the a. budgeted income statement. b. cash budget. c. production budget. d. budgeted balance sheet.

a. budgeted income statement.

The budget that is often considered to be the most important financial budget is the a. cash budget. b. capital expenditure budget. c. budgeted income statement. d. budgeted balance sheet.

a. cash budget.

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

a. has been developed in a top down fashion.

A purchases budget is used instead of a production budget by a. merchandising companies. b. service enterprises. c. not-for-profit organizations. d. manufacturing companies.

a. merchandising companies.

The primary benefits of budgeting include all of the following except it a. requires only top management to plan ahead and formalize their future goals. b. provides definite objectives for evaluating performance. c. creates an early warning system for potential problems. d. motivates personnel throughout the organization.

a. requires only top management to plan ahead and formalize their future goals.

Of the following items, which one is not obtained from an individual operating budget? a. Selling and administrative expenses b. Accounts receivable c. Cost of goods sold d. Sales

b. Accounts receivable

Which one of the following is not needed in preparing a production budget? a. Budgeted unit sales b. Budgeted raw materials c. Beginning finished goods units d. Ending finished goods units

b. Budgeted raw materials

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? a. Department managers should be held accountable for all variances from budgets for their departments. b. Department managers should only be held accountable for controllable variances for their departments. c. Department managers should be credited for favorable variances even if they are beyond their control. d. Department managers' performances should not be evaluated based on actual results to budgeted results.

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

Which of the following statements is incorrect? a. A continuous twelve-month budget results from dropping the month just ended and adding a future month. b. The production budget is derived from the direct materials and direct labor budgets. c. The cash budget shows anticipated cash flows. d. In the budget process for not-for-profit organizations, the emphasis is on cash flow rather than on revenue and expenses

b. The production budget is derived from the direct materials and direct labor budgets.

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

b. They help communicate goals and provide a basis for evaluation.

If a company has adopted continuous budgeting, the budget will show plans for a. every day. b. a full year ahead. c. the current year and the next year. d. at least five years.

b. a full year ahead.

The financial budgets include the a. cash budget and the selling and administrative expense budget. b. cash budget and the budgeted balance sheet. c. budgeted balance sheet and the budgeted income statement. d. cash budget and the production budget.

b. cash budget and the budgeted balance sheet.

A critical factor in budgeting for a service firm is to a. hire professional staff to perform the budgeting work. b. coordinate professional staff needs with anticipated services. c. classify all personnel as either variable or fixed. d. budget expenditures before anticipated receipts.

b. coordinate professional staff needs with anticipated services.

The cash budget reflects a. all revenues and all expenses for a period. b. expected cash receipts and cash disbursements from all sources. c. all the items that appear on a budgeted income statement. d. all the items that appear on a budgeted balance sheet.

b. expected cash receipts and cash disbursements from all sources.

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

b. expressing the budget in financial terms.

Long-range planning a. generally presents more detailed information than an annual budget. b. generally encompasses a longer period of time than an annual budget. c. is usually more accurate than an annual budget. d. is prepared on a quarterly basis if the budget is prepared on a quarterly basis.

b. generally encompasses a longer period of time than an annual budget.

A budget a. is a substitute for management. b. is an aid to management. c. can operate or enforce itself. d. is the responsibility of the accounting department.

b. is an aid to management.

The financing section of a cash budget is needed if there is a cash deficiency or if the ending cash balance is less than a. the prior years. b. management's minimum required balance. c. the amount needed to avoid a service charge at the bank. d. the industry average.

b. management's minimum required balance.

Instead of a production budget, a merchandiser will prepare a a. pseudo-production budget. b. merchandise purchases budget. c. master time sheet. d. sales forecast.

b. merchandise purchases budget.

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

b. past performance.

The total direct labor hours required in preparing a direct labor budget are calculated using the a. sales forecast. b. production budget. c. direct materials budget. d. sales budget.

b. production budget.

For a merchandiser, the starting point in the development of the master budget is the a. cash budget. b. sales budget. c. selling and administrative expenses budget. d. budgeted income statement.

b. sales budget.

The starting point in preparing a master budget is the preparation of the a. production budget. b. sales budget. c. purchasing budget. d. personnel budget.

b. sales budget.

Budgeting in not-for-profit organizations a. is not important because they are not profit-oriented. b. usually starts with budgeting expenditures, rather than receipts. c. is necessary only if some product is produced and sold. d. consists entirely of budgeted contributions.

b. usually starts with budgeting expenditures, rather than receipts.

What is the proper preparation sequencing of the following budgets? 1. Budgeted Balance Sheet 2. Sales Budget 3. Selling and Administrative Budget 4. Budgeted Income Statement a. 1, 2, 3, 4 b. 2, 3, 1, 4 c. 2, 3, 4, 1 d. 2, 4, 1, 3

c. 2, 3, 4, 1

Long-range planning usually encompasses a period of at least a. six months. b. 1 year. c. 5 years. d. 10 years.

c. 5 years.

Which of the following does not appear as a separate section on the cash budget? a. Cash receipts b. Cash disbursements c. Capital expenditures d. Financing

c. Capital expenditures

Which one of the following items would never appear on a cash budget? a. Office salaries expense b. Interest expense c. Depreciation expense d. Travel expense

c. Depreciation expense

Which one of the following sections would not appear on a cash budget? a. Cash receipts b. Financing c. Investing d. Cash disbursements

c. Investing

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

c. It provides assurance that the company will achieve its objectives.

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

c. Manufacturing overhead budget

Which one of the following is a problem resulting from a service company being overstaffed? a. Labor costs will be disproportionately low. b. Profits will be higher because of the additional salaries. c. Staff turnover may increase. d. Revenue may be lost.

c. Staff turnover may increase.

Hyde Corp.'s cash budget showed total available cash less cash disbursements. What does this amount equal? a. Ending cash balance b. Total cash receipts c. The excess of available cash over cash disbursements d. The amount of financing required

c. The excess of available cash over cash disbursements

If budgets are to be effective, there must be a. a history of successful operations. b. independent verification of budget goals. c. an organizational structure with clearly defined lines of authority and responsibility. d. excess plant capacity.

c. an organizational structure with clearly defined lines of authority and responsibility.

The direct materials budget details 1. the quantity of direct materials to be purchased. 2. the cost of direct materials to be purchased. a. 1 b. 2 c. both 1 and 2 d. neither 1 nor 2

c. both 1 and 2

The projection of financial position at the end of the budget period is found on the a. budgeted income statement. b. cash budget. c. budgeted balance sheet. d. sales budget.

c. budgeted balance sheet.

The single most important output in preparing financial budgets is the a. sales forecast. b. determination of the unit cost of the product. c. cash budget. d. budgeted income statement.

c. cash budget.

The formula for determining budgeted merchandise purchases is budgeted a. production + desired ending inventory - beginning inventory. b. sales + beginning inventory - desired ending inventory. c. cost of goods sold + desired ending inventory - beginning inventory. d. cost of goods sold + beginning inventory - desired ending inventory.

c. 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 a. faculty hours worked. b. number of administrators. c. credit hours taught by a department. d. number of days in the school term.

c. credit hours taught by a department.

In the direct materials budget, the quantity of direct materials to be purchased is computed by adding direct materials required for production to a. desired ending direct materials. b. beginning direct materials. c. desired ending direct materials less beginning direct materials. d. beginning direct materials less desired ending direct materials.

c. desired ending direct materials less beginning direct materials.

Beginning cash balance plus total receipts a. equals ending cash balance. b. must equal total disbursements. c. equals total available cash. d. is the excess of available cash over disbursements.

c. equals total available cash.

A master budget consists of a. an interrelated long-term plan and operating budgets. b. financial budgets and a long-term plan. c. interrelated financial budgets and operating budgets. d. all the accounting journals and ledgers used by a company

c. interrelated financial budgets and operating budgets.

For better management acceptance, the flow of input data for budgeting should begin with the a. accounting department. b. top management. c. lower levels of management. d. budget committee.

c. lower levels of management.

Budget development for the coming year usually starts a. a year in advance. b. the first month of the year to be budgeted. c. several months before the end of the current year. d. the last month of the previous year.

c. several months before the end of the current year.

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

c. shows forecasts for the industry and for the firm.

If budgets are to be effective, all of the following must be present except a. acceptance at all levels of management. b. research and analysis in setting realistic goals. c. stockholders' approval of the budget. d. sound organizational structure.

c. stockholders' approval of the budget.

It is important that budgets be accepted by a. division managers only. b. department heads only. c. supervisors only. d. All of these answers are correct.

d. All of these answers are correct.

Which of the following is not a proper match-up? a. Long range planning ↔ Strategies b. Budgeting ↔ Short-term goals c. Long-range planning ↔ 5 years d. Budgeting ↔ Long-term goals

d. Budgeting ↔ Long-term goals

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

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

Which of the following is not an operating budget? a. Direct labor budget b. Sales budget c. Production budget d. Cash budget

d. Cash budget

Which of the following items does not follow from the adoption of a budget? a. Promote efficiency b. Deterrent to waste c. Basis for performance evaluation d. Guarantee of accomplishing the profit objective

d. Guarantee of accomplishing the profit objective

Which of the following expenses would not appear on a selling and administrative expense budget? a. Sales commissions b. Depreciation c. Property taxes d. Indirect labor

d. Indirect labor

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

d. They are used in performance evaluation.

In many companies, responsibility for coordinating the preparation of the budget is assigned to a. the company's independent certified public accountants. b. the company's internal auditors. c. the company's board of directors. d. a budget committee.

d. a budget committee.

Coordinating the preparation of the budget is the responsibility of the a. treasurer. b. president. c. chief accountant. d. budget committee.

d. budget committee.

The budget committee in a company is often headed by the a. president. b. controller. c. treasurer. d. budget director.

d. budget director.

The culmination of preparing operating budgets is the a. budgeted balance sheet. b. production budget. c. cash budget. d. budgeted income statement.

d. budgeted income statement.

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

d. cash budget.

In a production budget, total required production units are the budgeted sales units plus a. beginning finished goods units. b. desired ending finished goods units. c. desired ending finished goods units plus beginning finished goods units. d. desired ending finished goods units minus beginning finished goods units

d. desired ending finished goods units minus beginning finished goods units

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

d. excessive inventories.

The budget committee would not normally include the a. research director. b. treasurer. c. sales manager. d. external auditor.

d. external auditor.

The master budget for a service enterprise a. will have the same types of budgets as a merchandiser. b. may include a sales budget for sales revenue. c. will not include a budgeted income statement. d. includes a service revenue budget based on expected client billings.

d. includes a service revenue budget based on expected client billings.

A budget is most likely to be effective if a. it is used to assess blame when things do not occur according to plans. b. it is not used to evaluate a manager's performance. c. employees and managers at the lower levels do not get involved in the budgeting process. d. it has top management support.

d. it has top management support.

A budget period should be a. monthly. b. for a year or more. c. long-term. d. long enough to provide an obtainable goal under normal business conditions

d. long enough to provide an obtainable goal under normal business conditions

The most common budget period is a. one month. b. three months. c. six months. d. one year.

d. one year.