Chappy 6
Operating decisions primarily deal with
The best use of scarce resources
Activity-based budgeting would separately estimate
The cost of a setup activity
The revenues budget identifies
The expected level of sales for the company
The use of activity-based budgeting is growing because of
The increased use of activity-based costing
Best products, an Atlanta based company, is in the midst of its budgeting process. It has already prepared its direct materials usage budget and is now in the process of preparing its direct material purchase budget. In addition to the details gathered to prepare the direct materials usage budget, Best also must know
The level of direct material inventory to be maintained
A master budget
Is the initial plan of what the company intends to accomplish in the period and evolves from both the operating and financing decisions
Which of the following is a limitation of using past performance as a basis for judging actual results
It does consider inefficiencies of previous periods
Which of the following is a benefit of budgeting
It helps managers gather information for improving future performance
Which of the following best describes a rolling budget
It is a budget that is always available for a specified future time period
Which of the following is true of responsibility accounting
It is a system that measures the plans, budgets, actions, and actual results of a responsibility center
Which of the following departments is most likely to be a profit center
The consulting department of a law firm
Which of the following is a factor while choosing the period of a budget
The motive for creating the budget
Demanding but achievable targets tend to
Improve performance of employees when they are closer to the target
Kaizen refers to incorporating cost reductions
In each successive budgeting period
Which of the following statements is true about activity-based budgeting
Activity-based budgeting provides more detailed information than cost-based budgeting
A company's actual performance should be compared against budgeted amounts for the same accounting period so that
Adjustments for future conditions can be included
Financial planning models
Are mathematical representations of the relationships affecting the budget process
Managers who feel that top management does not believe in the budget are most likely to
Be inactive participants in the budgeting process
Which of the following is a financial budget?
Budgeted balance sheet
The operating budget process generally concludes with the preparation of the
Budgeted income statement
Total finished units to be produced is based on the
Budgeted sales units
Which of the following is a benefit of keeping inventory levels low
Budgeted unit sales + targeted ending finished goods inventory - beginning finished goods inventory
Which of the following is true of a budget?
Budgets help managers to revise their plans and strategies
Sensitivity analysis helps managers evaluate risks
By showing the effects of changes to the original data or an underlying assumption
Participation of employees in the budgeting process helps
Create greater commitment towards the budget
The _____ is required to prepare the cash budget of an organization
Capital expenditures budget
The _____ is a component of financial budgets
Cash budget
In which order are the following developed first to last: A: Production budget B: Direct materials costs budget C: Budgeted income statment D: Revenues Budget
DABC
Activity-based budgeting makes it easier to
Determine how to reduce costs
____ include a budgeted statement of cash flows and a budgeted balance sheet
Financial budgets
The number of units in the sales budget and the production budget may differ because of a change in
Finished goods inventory levels
Financing decisions primarily deal with
How to obtain funds to acquire resources
Tom Magic Company manufactures various kinds of toys for different age groups. The company's flagship product is Rx. The company currently requires 8.50 labor hours to manufacture per unit of Rx. The company believes that because of numerous small improvements in the process, it will require 0.10 labor-hours less and hence will only 8.40 labor-hours in the next quarter. It will require 8.35 and 8.25 labor-hours in third and fourth quarter. The company has adopted
Kaizen budgeting
Which of the following component of operating budgets
Sales budget
The cash flow statement includes
Sales revenues of the organization
A budget is an end product of negotiations among senior and subordinate managers because
Senior managers want stiffer targets and subordinates want relatively easy targets
Financial planning software packages assist management with
Sensitivity analysis in their planning and budgeting activities
A master budget forces managers to examine the business as they plan, so they can
Set expectations against which actual results can be compared
_____ is the usual starting point for budgeting
The revenues budget
The budgeting process is most strongly influenced by
The sales forecast
Which of the following is true of master budgets?
They aid in coordinating what needs to be done to implement a plan
When performing a sensitivity analysis, if the selling price per unit is increased, then the
Total costs for sales commissions and other nonmanufacturing variable costs will increase
Budgets should
be flexible
To reduce budgetary slack management may
Use external benchmark performance measures
Which of the following statements is true of budgets
Master budgets express managements operating and financial plans
ERP systems store vast quantities of information about the materials, machines, and equipment, labor, power, maintenance, and setups needed to manufacture different products. This helps simplify the budgeting process as ERP systems
Can quickly calculate the manufacturing and nonmanufacturing costs based on a given sales quantity
Kaizen budgeting involves
Continual small cost reductions
The Japanese use the term kaizen when referring to
Continuous improvement
A maintenance manager of a theatre is most likely to be responsible for a(n)
Cost center
High inventory levels increase the
Cost of carrying inventory, the cost of quality, and shrinkage costs
Kaizen budgeting is driven by
Employees
Which of the following information is required by a company's manager while preparing a manufacturing overhead costs budget
Estimated expense for maintenance of factory building
Which of the following is required to arrive at the budgeted units to be produced in a year
Estimated finished goods inventory required at the end of the year
Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm's performance relative to its budgets?
Evaluations based on budgets can be meaningless due to factors such as exchange rate risk and other volatitlity
Silas has been recently promoted to head his department. He is responsible for maximizing the profits of the department and to ensure that the earnings are ploughed back into the business. Silas is most likely to head a(n)
Investment center
Which of the following is referred to as the bottom-up aspect of the budgeting process
Lower-level managers providing inputs to the budgeting process based on their specialized knowledge
A company using responsibility accounting system decides to exclude all uncontrollable costs from a manager's performance report. Jenson is the machine supervisor. Which of the following costs will impact Jenson's performance report?
Machine maintenance cost
Which of the following departments is most likely to be a cost center
Maintenance department of a luxury resort
Costs such as supervision, depreciation, maintenance, supplies, and power are included in the
Manufacturing overhead budget
Challenging budgets tend to
Motivate improved performance as employees work more intensely to avoid failure
Which of the following is most likely to be a cost driver for the variable portion of marketing costs
Number of units sold
Which of the following is generally expressed through a short-run budget
Operational plans
Financial analysts use the projected cash flow statement to
Plan for short-term cash investments
The cash budget is a schedule of expected cash receipts and disbursements that
Predicts the effect on the cash position at the given levels of operations
A stretch budget is a budget that
Represents a challenging, but achievable level of performance
Which of the following statements is true about responsibility accounting statements
Responsibility accounting segregates uncontrollable costs from controllable costs
Which of the following is true of budgets when they are administered throughtfully
They promote coordination within the subunits of a company
Which of the following is a reason why top managers want lower-level managers to participate in the budgeting process
To benefit from their experience with the day-to-day aspects of running the business
Which of the following is the fundamental purpose of responsibility accounting
To gather information that will enable future improvement
Rolling budgets help management to
Focus on the upcoming budget period
Responsibility accounting
Focuses on who should be asked about the information
When direct material and direct labor is the limiting factor, revenue budgets are usually based on
Maximum units that can be manufactured
The order to follow when preparing the operating budget is
Revenues budget, production budget, and direct manufacturing labor costs budget
Which of the following statements is true in the case of budgeting for multinational companies?
While budgeting for multinational companies, managers must be aware that budgets will not be used for evaluating performance
A primary consideration in assigning a cost to a responsibility center is
Who can best control the change in that cost
A manager of a revenue center is responsible
For only the revenues of his center
Budgets are used to
Formulate company strategies
A limitation of using past performance as a basis for judging actual results is that
Future conditions can be different from the past
A controllable cost is any cost that can be ___ by a responsibility center manager for a period of time
Influenced
The sales forecast should be primarily based on
Input from sales managers and sales representatives
A regional manager of a restaurant chain in charge of finding additional locations for expansion is most likely responsible for a(n)
Investment center
The regional sales office manager of a national firm is most likely responsible a(n)
Revenue center