Chapter 8 Accounting 2

Which of the following is not a benefit of budgeting?

The budgeting process enables managers to uncover bottlenecks as they occur.

self-imposed/participative budget

a budget that is prepared with the full cooperation and participation of managers at all levels

Companies prepare direct labor budgets to ________.

avoid labor shortages

All costs of production other than direct materials and direct labor are shown on the _____ _____ budget:

manufacturing overhead

The calculation of unit product cost requires information from the

manufacturing overhead budget

The direct materials budget directly relies on the

production budget

which of the following budgets are directly based on information from the sales budget?

production budget selling and administrative expense budget

The budgeting process begins with the preparation of the ______ budget.

sales

A merchandise purchasing budgeting is usually accompanied by a

schedule of expected cash disbursements

In large organizations, many smaller individual budgets submitted by department heads and other responsible people compromise the

selling and administrative budget

A company determines that the number of units sold is the cost driver for its variable selling and administrative expense budget. The product of its variable selling and administrative rate and budgeted unit sales will be ________.

total budgeted variable selling and administrative expenses

Which of the following is true of self-imposed (participative) budgets?

Self-imposed budgets give managers at all levels of an organization an opportunity to provide input into the budgeting process.

The cash budget

is prepared near the end of the master budget process

In a manufacturing company, the budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget

production

Self Imposed Budgeting

recognizing individuals at all levels of the organization as team members whose views and judgments are valued by top management

The system of accountability in which managers are held responsible for those items of revenue and costs—and only those items—over which they can exert significant control is referred to as ________.

responsibility accounting

Given budgeted sales of 10,000 units, desired ending inventory of 5,000 units, and beginning inventory of 2,000 units, required production is

10,000 / 5,000 - 2,000 = 13,000

Master Budget

A number of separate but interdependent budgets that formally lay out the company's sales, production, and financial goals and that culminates in a cash budget, budgeted income statement, and budgeted balance sheet.

Which of the following explains why operating budgets generally span a period of one year?

Companies choose a span of one year to correspond to their fiscal years.

Which of the following is deducted from the total selling and administrative expense budget to determine the cash disbursements for selling and administrative expense budget?

Depreciation expense

Which of the following is not a benefit of self-imposed budgets?

Lower-level managers are encouraged to create budgetary slack since they are more knowledgeable of day-to-day operations.

Limitations of self imposed budgeting include

budgetary slack sub optimal budget recommendations

budgets

communicate managements plan throughout the organization

A budget that keeps managers focused at least one year ahead is a

continuous or prepetual budget

In a budgeted income statement, _________ is subtracted from sales to arrive at gross margin.

cost of goods sold

The ending finished good inventory budget computes the

cost of unsold units

In a direct materials budget, the desired ending raw materials inventory for the year is equal to the ________.

desired ending raw materials inventory for the last period

Planning Process

developing goals and preparing various budgets to achieve those goals

The purpose of a budget should be to

establish goals measure operating results isolate areas needing attention

The purpose of preparing a direct materials budget is to ________

estimate the quantity of raw materials to be purchased

The cash budget includes four major sections: receipts, disbursements, the cash excess of deficiency, and

financing

Control

gathering feedback to ensure that the plan is being followed

The value of the ending inventory is calculated by multiplying the number of units in ending inventory by the ________.

unit product cost