Managerial Accounting Ch 5: Planning and Forecasting

What is the difference between standard price and standard cost of direct material? A. Standard price is the amount paid to obtain one unit of material from a vendor; standard cost is the amount to produce one unit of product. B. Standard price is the amount to produce one unit of product; standard cost is the amount paid to obtain one unit of material from a vendor. C. Standard price is the amount to produce one unit of product ; standard cost is the total cost incurred to produce one unit of a product. D. Standard price is the amount added to work in process as material is put into production; standard cost is the amount to produce one unit of product.

Standard price is the amount to produce one unit of product ; standard cost is the total cost incurred to produce one unit of a product.

Which is calculated by the direct labor budget? A. The number of direct and indirect labor hours required to meet the units in the sales budget. B. The number of direct and indirect labor hours required to meet the budgeted level of production. C. The number of direct labor hours required to meet the units in the sales budget. D. The number of direct labor hours required to meet the budgeted level of production.

The number of direct labor hours required to meet the budgeted level of production.

Under both participative budgeting and imposed budgeting, which best describes the process? A. curvilinear B. linear C. iterative D. equilateral

iterative

What is specified by direct materials standards? A. quantity and efficiency B. efficiency and pride C. quantity and price D. quality and usage

quantity and price

If a firm begins its budget each year at $0, then justifies each individual budget item, then this would be an example of ________ budgeting. A. top-down B. bottom-up C. zero-based D. incremental

zero-based

Which is true of an imposed budget? A. It tends to elicit more commitment to the budget from employees. B. It involves the fewest number of people in the budgeting process. C. It begins at the lowest levels of management and filters up through the organization. D. It is the least efficient method of budget preparation.

It involves the fewest number of people in the budgeting process.

One advantage of ideal standards is that employees will A. take pride in their work. B. None of the choices are correct. C. have high morale D. be motivated

None of the choices are correct.

Why is undesirable behavior especially common in a bottom-up budget environment? A. The combination of managers being required to explain unfavorable outcomes, whether or not they are in control of the factors that caused the outcomes; and managers can include budgetary slack to improve the likelihood of beating the budget. B. Managers may be required to explain unfavorable outcomes, whether or not they are in control of the factors that caused the outcomes. C. Managers have the ability to include budgetary slack to increase his or her chances of beating the budget. D. The combination of managers being required to explain unfavorable outcomes if they are in control of the factors that caused the outcomes; and the inclusion of budgetary slack to improve the likelihood of beating the budget.

The combination of managers being required to explain unfavorable outcomes, whether or not they are in control of the factors that caused the outcomes; and managers can include budgetary slack to improve the likelihood of beating the budget.

Which information about the number of units is needed in order to prepare the sales budget? A. The number of units expected to be sold and the cost of producing each unit. B. The number of units sold in the previous period and the price charged for the units. C. The number of units expected to be sold and the prices expected to be charged. D. The number of units expected to be produced and the prices expected to be charged.

The number of units expected to be sold and the prices expected to be charged.

A budget is A. an operating plan that is expressed primarily in financial terms. B. not related to tactical planning processes. C. an operating plan that is based primarily on qualitative metrics. D. not connected to the firm's strategic plan at all.

an operating plan that is expressed primarily in financial terms.

Pro-forma financial statements A. are prepared based on retrospective rather than prospective results. B. are prepared based on assumed rather than actual results. C. are prepared based on actual rather than assumed results. D. are prepared based on historical rather than forecasted results.

are prepared based on assumed rather than actual results.

Which is another term for describing budgetary slack? A. top-down slack B. budgetary padding C. bottom-up slack D. revenue padding

budgetary padding

One of the major reasons why small businesses fail is because of inadequate A. assets B. net income C. cash flow D. earnings per share

cash flow

Which of the following most closely details when payments for material purchases will occur? A. cash payments for materials budget B. cash inflow budget C. minimum cash balance budget D. cash receipts budget

cash payments for materials budget

If a firm adopts a participative budget approach, then A. employees who are held accountable for meeting the budget will participate in its creation. B. the budgeting process begins at the lowest levels of management and filters up through the organization. C. budgeting begins at the middle manager level, then diffuse information across organizational levels. D. executive management creates the budget, and that budget is then pushed down through the rest of the organization.

employees who are held accountable for meeting the budget will participate in its creation.

In a top-down budget environment, A. executive management creates the budget, and that budget is then pushed down through the rest of the organization. B. the budgeting process begins at the lowest levels of management and filters up through the organization. C. employees held accountable for meeting the budget participate in its creation. D. budgeting begins at the middle manager level, then diffuse information across organizational levels.

executive management creates the budget, and that budget is then pushed down through the rest of the organization.

Which of the following would best describe an environment where a machine never breaks down and employees always operate at full efficiency? A. median standards B. mean standards C. ideal standards D. practical standards

ideal standards

The master budget A. is a collection of smaller budgets that lead to pro-forma financial statements. B. is prepared by the sales department and forecasts only the number of units expected to be sold. C. is restricted to the plan for operations during the budget period. D. does not include the estimated selling and administrative expenses.

is a collection of smaller budgets that lead to pro-forma financial statements.

Practical standards A. represent a level of performance that signifies perfection. B. represent a level of performance that can be attained with reasonable effort. C. represent a level of performance that contains zero flaws. D. represent a level of performance that cannot be attained with reasonable effort.

represent a level of performance that can be attained with reasonable effort.

How is the standard cost of direct material calculated? A. actual price of direct material input x actual quantity of direct material inputs B. standard price of direct material input x actual quantity of direct material inputs C. standard price of direct material input x standard quantity of direct material inputs D. actual price of direct material input x standard quantity of direct material inputs

standard price of direct material input x standard quantity of direct material inputs