Chapter 8 Managerial Accounting

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A continuous or perpetual budget is a budget that almost never needs to be revised.

False

The budget method that maintains a constant twelve-month planning horizon by adding a new month on the end as the current month is completed is called:

A continuous budget

A benefit of self-imposed budgeting is that it may allow lower-level managers to create budgetary slack.

False

Both variable and fixed manufacturing overhead costs are included in the selling and administrative expense budget.

False

Which of the following budgets are prepared before the production budget?

No, Yes

Which of the following might be included as a disbursement on a cash budget?

No, Yes

Which of the following represents the normal sequence in which the below budgets are prepared?

Sales Budget, Budget Income Statement, Budget Balance Sheet

The sales budget is usually prepared before the production budget.

True

The sales budget often includes a schedule of expected cash collections.

True

Which of the following benefits could an organization reasonably expect from an effective budget program?

Yes, Yes

When preparing a production budget, the required production equals:

budgeted sales - beginning inventory + desired ending inventory.

One disadvantage of a self-imposed budget is that budget estimates prepared by front-line managers are often less accurate and reliable than estimates prepared by top managers.

False

Only variable manufacturing overhead costs are included in the manufacturing overhead budget.

False

The budgeted selling and administrative expense is calculated by multiplying the budgeted unit sales by the selling and administrative expense per unit.

False

The cash budget is typically prepared before the direct materials budget.

False

The direct materials budget is typically prepared before the production budget.

False

The manufacturing overhead budget lists all costs of production other than selling and administrative expenses.

False

The number of units to be produced in a period can be determined by adding the expected sales to the beginning inventory and then deducting the desired ending inventory.

False

The direct labor budget is based on:

The required production for the period

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

True

In companies that do not 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

On a cash budget, the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment.

True

Self-imposed budgets prepared by lower-level managers should be scrutinized by higher levels of management.

True

All the following are considered to be benefits of participative budgeting, except for:

When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.


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