Accounting Chapter 21

Compared to budgeting, long-range planning generally has the a. longer time period. b. same amount of detail. c. same time period. d. same emphasis.

a.

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

a.

In most cases, not-for-profit entities a. begin the budgeting process by budgeting expenditures rather than receipts. b. prepare budgets using the same steps as those used by profit-oriented enterprises. c. know budgeted cash receipts at the beginning of a time period, so they budget only for expenditures. d. can ignore budgets because they are not expected to generate net income.

a.

The budgeted balance sheet is a. developed from the budgeted balance sheet for the preceding year and the budgets for the current year. b. the last operating budget prepared. c. used to prepare the cash budget. d. all of the above.

a.

The budgeted income statement is a. the end-product of the operating budgets. b. the starting point of the master budget. c. the end-product of the financial budgets. d. dependent on cash receipts and cash disbursements.

a.

The essentials of effective budgeting do not include a. top-down budgeting. b. management acceptance. c. research and analysis. d. sound organizational structure.

a.

The formula for computing the direct labor budget is to multiply the direct labor cost per hour by the a. total required direct labor hours. b. physical units to be produced. c. equivalent units to be produced. d. no correct answer is given.

a.

The formula for the production budget is budgeted sales in units plus a. desired ending finished goods units less beginning finished goods units. b. desired ending merchandise inventory less beginning merchandise inventory. c. beginning finished goods units less desired ending finished goods units. d. desired ending direct materials units less beginning direct materials units.

a.

Which of the following lists includes only financial budgets? a. Budgeted balance sheet, cash budget, and the capital expenditures budget. b. Capital expenditure budget, sales budget, and budgeted income statement. c. Budgeted income statement, budgeted balance sheet, and sales budget. d. Cash budget, production budget, and capital expenditures budget.

a.

Which one of the following budgets is considered to be the most important financial budget? a. Cash budget. b. Sales budget. c. Budgeted income statement. d. Budgeted balance sheet.

a.

A sales budget is a. prepared only for credit sales. b. management's best estimate of sales revenue for the year. c. not the starting point for the master budget. d. derived from the production budget.

b.

In the merchandise purchases budget, required merchandise purchases are computed by adding a. budgeted cost of goods sold and desired ending merchandise inventory together. b. budgeted cost of goods sold and desired ending merchandise inventory together and deducting beginning merchandise inventory. c. budgeted sales and desired ending merchandise inventory together. d. budgeted sales and desired ending merchandise inventory together and deducting beginning merchandise inventory.

b.

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

b.

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

b.

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

b.

Which of the following is one of the factors that must be present if budgets are to be effective? a. The budget committee must prepare the budget. b. The company must have a sound organizational structure. c. Participative budgeting must be used. d. The budget should be prepared for long time periods.

b.

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

b.

Financial budgets consist of all of the following except the a. cash budget. b. budgeted balance sheet. c. budgeted income statement. d. capital expenditure budget.

c.

Operating budgets include all of the following except the a. sales budget. b. production budget. c. capital expenditure budget. d. budgeted income statement.

c.

The format of a cash budget is a. Beginning cash balance + Cash revenues - Cash expenses = Ending cash balance. b. Beginning cash balance + Cash receipts + Cash from financing - Cash disbursements = Ending cash balance. c. Beginning cash balance + Cash receipts - Cash disbursements +/- Financing = Ending cash balance. d. Beginning cash balance + Net income- Cash dividends = Ending cash balance.

c.

Which one of the following budgets would not be prepared for a merchandising company? a. Cash budget. b. Merchandise purchases budget. c. Production budget. d. Capital expenditures budget.

c.

Which one of the following is an input that is needed in order to budget a service company? a. Determining expected units to be sold. b. Determining cash needed for production. c. Determining expected billing time for each staff member. d. Determine estimated billings of clients.

c.

A budget a. is the responsibility of management accountants. b. ignores past performance because it represents management's plans for a future time period. c. may promote efficiency but has no role in evaluating performance. d. is the primary method of communicating agreed-upon objectives throughout an organization.

d.

Budgets are used by all of the following except a. merchandisers. b. service enterprises. c. not-for-profit organizations. d. all of these organizations use budgets.

d.

Each of the following budgets is used in preparing the budgeted income statement except the a. sales budget. b. selling and administrative budget. c. direct labor budget. d. capital expenditure budget.

d.

Each of the other budgets in the master budget depends on the a. budgeted income statement. b. cash budget. c. production budget. d. sales budget.

d.

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

d.

Long-range planning usually encompasses a period of a. a quarter. b. a year. c. at least two years. d. at least five years.

d.

The budget for a merchandiser differs from a budget for a manufacturer because (a) a merchandise purchases budget replaces the production budget. (b) the manufacturing budgets are not applicable. (c) none of the above. (d) both (a) and (b) above.

d.

The cash budget contains sections for each of the following except a. cash receipts. b. cash disbursements. c. financing. d. capital expenditures.

d.

The direct labor budget and the manufacturing overhead budget are prepared directly from the a. sales budget. b. cash budget. c. budgeted income statement. d. production budget

d.

The most common budget period is a a. quarter. b. week. c. month. d. year.

d.

Which of the following are correct statements about a budget? a. It is a formal written statement of management's plans for a specified future time period. b. It becomes an important basis for evaluating performance. c. It promotes efficiency and serves as a deterrent to waste and inefficiency. d. All of these options are correct statements.

d.

Which of the following is not a benefit of budgeting? a. Management can plan ahead. b. An early warning system is provided for potential problems. c. The coordination of activities is facilitated. d. It enables disciplinary action to be taken at every level of responsibility.

d.

Which one of the following is a primary benefit of budgeting? a. It eliminates potential problems so that managers do not need to be concerned that things may get out of hand. b. It eliminates the need for coordination of activities throughout the company. c. It removes the 'plan ahead' from lower level managers so that they can focus on operations. d. It provides definite objectives for evaluating performance.

d.

Which one of the following is necessary if a company expects its budget to be effective? a. The budget amounts must be based on those of previous accounting periods. b. The company's budget should be a good substitute for management. c. Managers must be held responsible for controllable and uncontrollable costs. d. The company must have a sound organizational structure.

d.

A merchandiser uses a merchandise purchases budget in addition to a production budget.

false

The chief accountant (controller) has responsibility for coordinating the preparation of the budget.

false

The most common budget period is one month.

false

The budgeted income statement is the starting point in preparing financial budgets.

false; income statement is an operating budget

The production budget is the first budget prepared in the master budget.

false; sales budget is first

Budgeting facilitates the coordination of activities within the business by correlating the goals of each segment with overall company objectives.

true

The budgeted balance sheet is developed from the budgeted balance sheet for the preceding year and the budgets for the current year.

true

The direct materials budget shows both the quantity and cost of direct materials to be purchased.

true

The financing section of a cash budget shows expected borrowings and the repayment of borrowed funds plus interest.

true

The master budget is a set of interrelated budgets that constitutes a plan of action for a specified time period.

true