Managerial Accounting Chapter 8

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

false

The cash budget is usually prepared after the budgeted income statement.

false

The direct labor budget shows the direct labor-hours required to produce the desired ending inventory.

false

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

false

The first budget a company prepares in a master budget is the production budget.

false

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

Sales Budget, Budgeted Income Statement, Budgeted Balance Sheet

Which of the following is NOT an objective of the budgeting process?

To ensure that the company continues to grow

When preparing a production budget, the required production equals

budgeted sales - beginning inventory + desired ending inventory

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

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

Budgets are used to plan and to control operations.

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

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

true

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.

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

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

false

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

false

In a merchandising company, the required merchandise purchases for a period are determined by subtracting the desired ending inventory from the sum of the units to be sold during the period and the units in beginning inventory.

false

In business, a budget is a method for putting a limit on spending.

false

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

Planning involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.

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The basic idea underlying responsibility accounting is that each manager should be held responsible for the overall profit of the company to ensure that all managers are acting together.

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 manufacturing overhead budget is typically prepared before the production budget.

false

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

The sales budget is usually prepared before the production budget.

true

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

true

When preparing a direct materials budget, the units of raw material needed to meet production should be added to desired ending inventory and the beginning inventory for raw materials should be subtracted to determine the amount of raw materials to be purchased.

true