Chapter 8. Master Budgeting Learn Smart

If inventory levels are ________, the result can lead to lost sales or last-minute, high-cost production efforts. A. appropriate B. insufficient C. excessive

B. insufficient

All costs of production other than direct materials and direct labor are shown on the ________ budget. A. ending finished goods inventory B. manufacturing overhead C. merchandise purchases D. cash

B. manufacturing overhead

Carter Production, Inc.'s required production for the first six month of the year is as follows. Month | Required Production Jan | 50,000 Feb | 70,000 Mar | 85,000 Apr | 105,000 May | 110,000 Jun | 120,000 Each unit requires two pounds of material. Given a desired ending inventory of 20% of next month's production needs, the pounds of material to be purchased in February is: A. 134,000 B. 154,000 C. 146,000 D. 174,000

C. 146,000 Feb production needs (70,000 x 2) = 140,000 140,000 + ending inventory (20% of Mar production needs: 85,000 x 2 x 20%) = 34,000 34,000 - Beginning Inventory (20% of Feb) 70,000 x 2 x 20% = 28,000 140,000 + 34,000 - 28,000 = 146,000

The cash budget uses information from several other budgets. Which of the following budgets is NOT used to prepare the cash budget? A. Sales B. Direct labor C. Production D. Selling and administrative

C. Production

When a manager creates a budget that is too easy to attain, ________ occurs. A. self-imposted budgeting B. participative budgeting C. budgetary slack D. perpetual budgeting

C. budgetary slack

The receipts, disbursements, excess or deficiency, and financing section are all parts of the _______ budget. A. selling and administrative expense B. sales C. cash D. production

C. cash

In a manufacturing company, the _________ budget details the raw materials that must be purchased to fulfill the production budget and provide for adequate inventories A. sales B. production C. direct materials D. merchandise purchases

C. direct materials

The cash budget _________. A. uses information from the budgeted balance sheet and income statement B. is the first budget prepared in the master budget process C. is prepared near the end of the master budget process

C. is prepared near the end of the master budget process

Operating budgets generally cover a _______ period. A. five-year B. one-month C. one-year D. one-quarter

C. one-year

Variable selling and administrative expenses are calculated by multiplying the budgeted units __________ by the variable selling and administrative expense per unit. A. produced B. purchased C. sold

C. sold

Working hours required to satisfy the production budget are shown on the ________ budget. A. cash B. merchandise purchases C. direct materials D. direct labor

D. direct labor

The amount of goods to be acquired from suppliers during the period is shown on the ________ budget. A. direct labor B. sales C. manufacturing overhead D. merchandise purchases

D. merchandise purchases

More accurate estimates and higher motivation are generally the result of using a(n) _______ budget. A. continuous B. imposed C. perpetual D. participative

D. participative

True/False: The definition of responsibility accounting states the senior management is directly responsible for every decision made by lower level management.

False

Risks of NOT knowing in advance how much labor time will be needed throughout the budget period includes ________. a. labor shortages b. excessive inventory levels c. erratic layoffs d. low employee morale

a,c,d a. labor shortages c. erratic layoffs d. low employee morale

Budgets _________. a. define goals and objectives that can serve as benchmarks for evaluating subsequent performance b. provide each department with the same amount of money to spend, so that all departments are treated fairly c. and the budgeting process can uncover potential bottlenecks before they occur d. coordinate the activities of the entire organization by integrating the plans of its various parts e. force managers to think about and plan for the future

a,c,d,e a. define goals and objectives that can serve as benchmarks for evaluating subsequent performance c. and the budgeting process can uncover potential bottlenecks before they occur d. coordinate the activities of the entire organization by integrating the plans of its various parts e. force managers to think about and plan for the future

Which of the following budgets are directly based on information from the sales budget? a. Selling and administrative expense budget b. Production budget c. Direct labor budget d. Direct materials budget

a. Selling and administrative expense budget b. Production budget

Many managers believe that being empowered to create their own self-_______ budgets is the most effective method of budget preparation.

imposed

A company's planned net profit that serves as a benchmark against which subsequent company performance can be measured is shown on the budgeted ________ _________.

income statement

A number of separate, but interdependent, budgets that formally lay out the company's sales, production, and financial goals are contained in the __________ budget.

master

A budget that keeps managers focused at least one year ahead is a continuous or ________ budget.

perpetual

In a manufacturing company, the _________ budget is used to determine the budgets for manufacturing costs, including the direct materials budget, the direct labor budget, and the manufacturing overhead budget.

production

A detailed schedule showing the expected sales for the budget period is presented on the ________ budget.

sales

In a manufacturing company, which budget is used as the basis for creating the direct materials budget, the direct labor budget, and the manufacturing overhead budget? A. Production B. Sales C. Finished goods inventory D. Cash

A. Production

The ending finished goods inventory budget computes the ________ units. A. cost of unsold B. number of unsold C. number of sold D. cost of sold

A. cost of unsold

In a manufacturing company, the _______ budget shows the number of units that must be manufactured to satisfy sales needs and provide for the desired ending inventory. A. production B. cash C. sales D. direct materials

A. production

Budgeted expenses for area other than manufacturing are shown on the _______ budget. A. selling and administrative B. manufacturing overhead C. cash D. ending finished goods inventory

A. selling and administrative

In companies that do NOT use a self-imposed budgeting process, profit targets are generally set by _______. A. top managers B. the board of directors C. employees D. lower-level managers

A. top managers