Managerial Accounting Chapter 8

16. A continuous (or perpetual) budget: A. is prepared for a range of activity so that the budget can be adjusted for changes in activity. B. is a plan that is updated monthly or quarterly, dropping one period and adding another. C. is a strategic plan that does not change. D. is used in companies that experience no change in sales.

B. is a plan that is updated monthly or quarterly, dropping one period and adding another

15. National Telephone company has been forced by competition to put much more emphasis on planning and controlling its costs. Accordingly, the company's controller has suggested initiating a formal budgeting process. Which of the following steps will NOT help the company gain maximum acceptance by employees of the proposed budgeting system? A. Implementing the change quickly. B. Including in departmental responsibility reports only those items that are under the department manager's control. C. Demonstrating top management support for the budgeting program. D. Ensuring that favorable deviations of actual results from the budget, as well as unfavorable deviations, are discussed with the responsible managers

A. Implementing the change quickly

12. Which of the following is not a benefit of budgeting? A. It reduces the need for tracking actual cost activity. B. It sets benchmarks for evaluation performance. C. It uncovers potential bottlenecks. D. It formalizes a manager's planning efforts

A. It reduces the need for tracking actual cost activity

20. Which of the following is not correct regarding the manufacturing overhead budget? A. Total budgeted cash disbursements for manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead. B. Manufacturing overhead costs should be broken down by cost behavior. C. The manufacturing overhead budget should provide a schedule of all costs of production other than direct materials and direct labor. D. A schedule showing budgeted cash disbursements for manufacturing overhead should be prepared for use in developing the cash budget.

A. Total budgeted cash disbursements for manufacturing overhead is equal to the total of budgeted variable and fixed manufacturing overhead

18. Budgeted production needs are determined by: A. adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total. B. adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total. C. adding budgeted sales in units to the desired ending inventory in units. D. deducting the beginning inventory in units from budgeted sales in units

A. adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total

11. Which of the following represents the normal sequence in which the indicated budgets are prepared? A. Direct Materials, Cash, Sales B. Production, Cash, Income Statement C. Sales, Balance Sheet, Direct Labor D. Production, Manufacturing Overhead, Sales

B. Production, Cash, Income Statement

19. The budgeted amount of raw materials to be purchased is determined by: A. adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule. B. subtracting the beginning inventory of raw materials from the raw materials needed to meet the production schedule. C. adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials. D. adding the beginning inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the desired ending inventory of raw materials

C. adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials.

13. Self-imposed budgets typically are: A. not subject to review by higher levels of management since to do so would contradict the participative aspect of the budgeting processing. B. not subject to review by higher levels of management except in specific cases where the input of higher management is required. C. subject to review by higher levels of management in order to prevent the budgets from becoming too loose. D. not critical to the success of a budgeting program

C. subject to review by higher levels of management in order to prevent the budgets from becoming too loose

14. Which of the following represents the correct order in which the indicated budget documents for a manufacturing company would be prepared? A. Sales budget, cash budget, direct materials budget, direct labor budget B. Production budget, sales budget, direct materials budget, direct labor budget C. Sales budget, cash budget, production budget, direct materials budget D. Selling and administrative expense budget, cash budget, budgeted income statement, budgeted balance sheet

D. Selling and administrative expense budget, cash budget, budgeted income statement, budgeted balance sheet

17. Which of the following statements is not correct? A. The sales budget is the starting point in preparing the master budget. B. The sales budget is constructed by multiplying the expected sales in units by the sales price. C. The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period. D. The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period

D. The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period

1. The production budget is typically prepared prior to the sales budget. True False

False

10. In the selling and administrative budget, the non-cash charges (such as depreciation) are added to the total budgeted selling and administrative expenses to determine the expected cash disbursements for selling and administrative expenses. True False

False

4. One difficulty with self-imposed budgets is that they are not subject to any type of review. True False

False

6. Planning and control are essentially the same thing. True False

False

7. Sales forecasts are drawn up after the cash budget has been completed because only then are the funds available for marketing known. True False

False

2. One benefit of budgeting is that it coordinates the activities of the entire organization. True False

True

3. Both planning and control are needed for an effective budgeting system. True False

True

5. The master budget is a network consisting of many separate budgets that are interdependent. True False

True

8. A sales budget is a detailed schedule showing the expected sales for the budget period; typically, it is expressed in both dollars and units of product. True False

True

9. Both variable and fixed manufacturing overhead costs are included in the manufacturing overhead budget. True False

True