acct 2101 ch 9 questions

A purchases budget is used instead of a production budget by A manufacturing companies. B service enterprises. C merchandising companies. D not-for-profit organizations.

C merchandising companies.

A company that uses the top-down approach rather than a participative process will feel the impact of its budgeting process mostly in which form? A lack of commitment of operating managers to the final budget B longer time cycle required to prepare the budget C greater commitment of operating managers to the final budget D greater flow of information from the bottom to the top

A lack of commitment of operating managers to the final budget

Which of the following represents the flow of budget data under participative budgeting? (A) President to Plant Manager to Department Manager. (B) Department Manager to Plant Manager to Vice President of Production. (C) Vice President of Production to Plant Manager to Department Manager. (D) Department Manager to Vice President of Production to Plant Manager.

(B) Department Manager to Plant Manager to Vice President of Production.

Which of the following is a characteristic of long-range planning? (A) It is prepared for periods not exceeding one year. (B) More detail is presented than in a budget. (C) It focuses on achieving goals such as meeting annual profit objectives. (D) It is used to review progress rather than as a basis for control.

(D) It is used to review progress rather than as a basis for control.

Coordinating the preparation of the budget is the responsibility assigned to the (A) lower levels of management. (B) accounting department. (C) top management. (D) budget committee.

(D) budget committee.

In order to assure better management acceptance, the flow of input data for budgeting should begin with the (A) top management. (B) budget committee. (C) accounting department. (D) lower levels of management.

(D) lower levels of management.

Operating budgets include the1. Production budget2. Cash budget A 1. only B Neither 1. nor 2. C 2. only D Both 1. and 2.

A 1. only

________ is/are shown on the _____________. A Advertising expense; selling and administrative expense budget B Office salaries; direct labor budget C Indirect labor; selling and administrative expense budget D Office salaries; manufacturing overhead budget

A Advertising expense; selling and administrative expense budget

Which of the following statements is correct? A 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 budget. C Service companies prepare budget data using an expected input approach while manufacturers prepare budget data using an expected output approach. D The budgets of service companies are approved by voters.

A In the budget process for not-for-profit organizations, the emphasis is on cash flow rather than on revenue and expenses.

Fullerton Law Offices borrowed $1,200,000 to renovate their office and client meeting areas. The terms of the loan were 5.5% annually with the principal and interest due in 8 years. If you were preparing Fullerton's budgeted balance sheet, where would you record this loan? A Long-Term Debt B Current Liabilities C Accounts Payable D Short-Term Debt

A Long-Term Debt

Which of the following is most likely to result in a budget that will likely result in realistic goals A A budget that is the same as the previous period's budget. B A budget based on research and analysis. C A budget that is identical to a competitor's budget. D A budget that is developed solely by company executives.

B A budget based on research and analysis.

Spencer Accountants provides accounting services to businesses and individuals. They build their budget around the number of hours each accountant expects to bill their clients. In contrast, Weaver Carpet Cleaners provides carpet cleaning services to businesses and individuals. They build their budget around the estimated square feet of carpet that they will clean. What is the difference between these two companies? A Spencer Accountants bases their master budget on a production budget, whereas Weaver Carpet Cleaners bases their master budget on a sales budget. B Spencer Accountants bases their budget on expected output, whereas Weaver Carpet Cleaners bases their budget on expected input. C Spencer Accountants bases their master budget on a sales budget, whereas Weaver Carpet Cleaners bases their master budget on a production budget. D Spencer Accountants bases their budget on expected input, whereas Weaver Carpet Cleaners bases their budget on expected output.

D Spencer Accountants bases their budget on expected input, whereas Weaver Carpet Cleaners bases their budget on expected output.

Jeremy is the CFO of a growing company. When the company was smaller, Jeremy developed the master budget on his own with input from the CEO. Now that the company is larger, he feels that both he and the CEO are too far removed from the day-to-day operations to accurately develop a budget. What would you suggest to help Jeremy develop an effective budget? A The company should develop a budget committee to receive input from department managers for their own portion of the budget. B The company should allow lower-level managers to develop the budget without input from the CFO and CEO. C The CFO and CEO should use long-range planning rather than budgeting to develop company goals because that is more effective for larger companies. D The CFO and CEO should develop a budget with budgetary slack so they are more likely to reach their goals even if they do not keep up with day-to-day activities.

A The company should develop a budget committee to receive input from department managers for their own portion of the budget.

Jerry is attempting to calculate the cost of goods sold of the budgeted income statement. Which budgets will he need access to in order to complete this calculation? (Select the three that apply.) A manufacturing overhead budget B direct labor budget C selling and administrative expense budget D direct materials budget E production budget F capital expenditure budget

A manufacturing overhead budget B direct labor budget D direct materials budget

Which line items of the budgeted balance sheet are calculated based on operating budgets? A Finished goods inventory, raw materials inventory, buildings and equipment, and retained earnings. B Finished goods inventory, raw materials inventory, and retained earnings. C Cash, accounts receivable, accounts payable, and buildings and equipment. D Accounts receivable, accounts payable, retained earnings, and accumulated depreciation.

B Finished goods inventory, raw materials inventory, and retained earnings.

Budgets are more closely associated with the management function of ____________ -directing -planning

-planning

The ________________ is derived from the sales forecast. -sales budget -production budget

-sales budget

Hailey has been tasked with overseeing the development of the company's master budget. This is the first time Hailey has had this role, and she's not sure where to start. What advice would you give her? Why? A She should help develop the selling and administrative budget before developing the manufacturing overhead budget because selling and administrative expenses are part of manufacturing overhead. B She should help develop the sales budget before the production budget because production will depend on the number of sales. C She should help develop the cash budget before the production budget because understanding cash flows will help determine the level of production. D She should help develop the direct material and direct labor budgets before the production budget because the production budget is just the sum of the direct material and direct labor budgets.

B She should help develop the sales budget before the production budget because production will depend on the number of sales.

One major difference between a merchandiser's master budget and a manufacturer's master budget is that A a manufacturer does not include direct materials, direct labor, and merchandising overhead budgets, whereas a merchandiser does. B a manufacturer does not include a sales budget, whereas a merchandiser does. C a merchandiser does not include direct materials, direct labor, and manufacturing overhead budgets, whereas a manufacturer does. D a merchandiser does not include a sales budget, whereas a manufacturer does.

C a merchandiser does not include direct materials, direct labor, and manufacturing overhead budgets, whereas a manufacturer does.

Naylor Industries produced a master budget that was strictly followed by all departments. At the end of the period, the actual numbers were off by less than 1% of the budgeted numbers. It is likely that Naylor Industries had a A top-down budget. B continuous budget. C budget accepted by all levels of management. D budget identical to the previous period.

C budget accepted by all levels of management.

Eliciting information from lower-level operating managers and their subordinates with the help of a bottom-to-top budgeting process A is an effective way to eliminate incentive payments. B is effective only for small organizations. C is a more time consuming and costly but beneficial exercise. D is usually not worth the extra cost involved.

C is a more time consuming and costly but beneficial exercise.

One way in which budgetary planning benefits a firm is by A making it easier for the firm to meet its projected monthly financial goals. B allowing the firm to more easily obtain funding from banks and outside investors. C providing definite objectives for evaluating performance at each level of responsibility. D making it harder for managers to "pad" their department's financial projections.

C providing definite objectives for evaluating performance at each level of responsibility.

Nancy's Nannies employs 12 men and women who are placed with clients to watch the clients' children while the clients are at work during the day. They also often stay overnight with the children when the parents are on business trips. Nancy's Nannies is an example of a A not-for-profit organization. B manufacturing company. C service company. D merchandising company.

C service company.

What effect does an increase in the production budget have on the sales budget? A An increase in the production budget will increase the sales budget by double the amount. B An increase in the production budget will increase the sales budget by the same amount. C An increase in the production budget will decrease the sales budget by the same amount. D An increase in the production budget has no effect on the sales budget.

D An increase in the production budget has no effect on the sales budget.

The company that is most likely to use a budget committee when developing a company-wide budget is A Nancy's Noodles, an online company run by one family that sells homemade noodles. B Huntington Lumber Co., a local lumber and hardware store. C Rendon Hospitality, a regional company of small bed and breakfasts. D Bruner Electronics, an international electronics manufacturer.

D Bruner Electronics, an international electronics manufacturer.

Venegas Shoes is a small retailer specializing in shoes for children. Mena Department Store sells women's, men's, and children's clothing, shoes, jewelry, and accessories. How would their merchandise purchases budget differ? A Mena's merchandise purchases budget would likely be based on raw materials purchased, whereas Venegas' merchandise purchases budget would likely be based on cost of goods sold. B Venegas' merchandise purchases budget would likely be divided into departments and then incorporated into a storewide budget, whereas Mena's merchandise purchases budget would likely not be divided into departments. C Mena's merchandise purchases budget would likely be based on cost of goods sold, whereas Venegas' merchandise purchases budget would likely be based on raw materials purchased. D Mena's merchandise purchases budget would likely be divided into departments and then incorporated into a storewide budget, whereas Venegas' merchandise purchases budget would likely not be divided into departments.

D Mena's merchandise purchases budget would likely be divided into departments and then incorporated into a storewide budget, whereas Venegas' merchandise purchases budget would likely not be divided into departments.

Nicholas is creating a budget for an organization, and the first information he asked for is the organization's expected expenditures. Margo is also creating a budget for an organization, but the first information she asked for is the organization's expected sales. Why are Nicholas and Margo using a different budgeting process? A Nicholas is likely creating a budget for a manufacturing organization, whereas Margo is likely creating a budget for a not-for-profit organization. B Nicholas is likely creating a budget for a service organization, whereas Margo is likely creating a budget for a manufacturing organization. C Nicholas is likely creating a budget for a merchandising organization, whereas Margo is likely creating a budget for a service organization. D Nicholas is likely creating a budget for a not-for-profit organization, whereas Margo is likely creating a budget for a for-profit organization.

D Nicholas is likely creating a budget for a not-for-profit organization, whereas Margo is likely creating a budget for a for-profit organization.

Ellen is a manager who helps develop sales promotions, targets customers for upselling, and searches for potential new customers. Which of the following budgets would Ellen MOST likely help develop? A Cash budget. B Selling and administrative expense budget. C Manufacturing overhead budget. D Sales budget.

D Sales budget.

An organization is planning its master budget. The planners begin by listing all of their expected cash outflows, including employee salaries and benefits, utilities, program expenses, insurance, vehicle registration and maintenance, and rent expenses. This organization is likely a A manufacturer. B merchandiser. C service company. D not-for-profit.

D not-for-profit.

Rowan Catering is a service company that employs 12 full-time chefs and 150 part-time servers. The company frequently caters 50 parties each week in a large metro area. However, with the downturn in the economy, they have only been averaging 28 parties per week. How will this affect their direct labor budget? A Their direct labor budget will not be affected. B Their direct labor budget will decrease, which means they will likely need to lay off some employees. C Their direct labor budget will increase because they will be paying employees who have no work to do. D Their direct labor budget will increase, which means they will have to increase their prices to pay their employees adequately.

B Their direct labor budget will decrease, which means they will likely need to lay off some employees.