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Questions in this quiz (108)
1The cash budget is usually prepared after the budgeted income statement.
- ATrue
- BFalse
2The manufacturing overhead budget is typically prepared before the production budget.
- ATrue
- BFalse
3Self-imposed budgets prepared by lower-level managers should be scrutinized by higher levels of management.
- ATrue
- BFalse
4The 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.
- ATrue
- BFalse
5Budgets are used to plan and to control operations.
- ATrue
- BFalse
6The sales budget is usually prepared before the production budget.
- ATrue
- BFalse
7A continuous or perpetual budget is a budget that almost never needs to be revised.
- ATrue
- BFalse
8The cash budget is typically prepared before the direct materials budget.
- ATrue
- BFalse
9In business, a budget is a method for putting a limit on spending.
- ATrue
- BFalse
10Planning involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.
- ATrue
- BFalse
11A benefit of self-imposed budgeting is that it may allow lower-level managers to create budgetary slack.
- ATrue
- BFalse
12The first budget a company prepares in a master budget is the production budget.
- ATrue
- BFalse
13One 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.
- ATrue
- BFalse
14The direct materials budget is typically prepared before the production budget.
- ATrue
- BFalse
15A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels.
- ATrue
- BFalse
16 The sales budget often includes a schedule of expected cash collections.
- ATrue
- BFalse
17The 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.
- ATrue
- BFalse
18In 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
- ATrue
- BFalse
19When 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.
- ATrue
- BFalse
20The direct labor budget shows the direct labor-hours required to produce the desired ending inventory.
- ATrue
- BFalse
21The manufacturing overhead budget lists all costs of production other than selling and administrative expenses.
- ATrue
- BFalse
22Only variable manufacturing overhead costs are included in the manufacturing overhead budget.
- ATrue
- BFalse
23The budgeted selling and administrative expense is calculated by multiplying the budgeted unit sales by the selling and administrative expense per unit.
- ATrue
- BFalse
24Both variable and fixed manufacturing overhead costs are included in the selling and administrative expense budget.
- ATrue
- BFalse
25On a cash budget, the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment.
- ATrue
- BFalse
26On a cash budget, the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment.
- AYes, Yes
- BYes, no
- CNo, Yes
- DNo, No
27Which of the following represents the normal sequence in which the below budgets are prepared?
- ASales Budget, Budgeted Balance Sheet, Budgeted Income Statement
- BBudgeted Balance Sheet, Sales Budget, Budgeted Income Statement
- CSales Budget, Budgeted Income Statement, Budgeted Balance Sheet
- DBudgeted Income Statement, Sales Budget, Budgeted Balance Sheet
28Which of the following is NOT an objective of the budgeting process?
- ATo communicate management's plans throughout the entire organization
- BTo provide a means of allocating resources to those parts of the organization where they can be used most effectively.
- CTo ensure that the company continues to grow.
- DTo uncover potential bottlenecks before they occur.
29Which of the following benefits could an organization reasonably expect from an effective budget program
- AYes Yes
- BYes No
- CNo Yes
- DNo No
30The 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:
- Aoperating budget
- Bcapital budget
- Ccontinuous budget
- Dmaster budget
31All the following are considered to be benefits of participative budgeting, except for:
- AIndividuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization.
- BThe budget estimates are prepared by those in directly involved in activities
- CWhen managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.
- DManagers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others.
32When preparing a production budget, the required production equals:
- Abudgeted sales + beginning inventory + desired ending inventory.
- Bbudgeted sales - beginning inventory + desired ending inventory.
- Cbudgeted sales - beginning inventory - desired ending inventory.
- Dbudgeted sales + beginning inventory - desired ending inventory.
33The direct labor budget is based on:
- Athe desired ending inventory of finished goods.
- Bthe beginning inventory of finished goods.
- Cthe required production for the period
- Dthe required materials purchases for the period.
34Which of the following might be included as a disbursement on a cash budget?
- AYes Yes
- BYes No
- CNo Yes
- DNo No
35Budget reports comparing actual results with planned objectives should be prepared only once a year
- ATrue
- BFalse
36If actual results are different from planned results, the difference must always be investigated by management to achieve effective budgetary control.
- ATrue
- BFalse
37Certain budget reports are prepared monthly, whereas others are prepared more frequently depending on the activities being monitored.
- ATrue
- BFalse
38The master budget is not used in the budgetary control process.
- ATrue
- BFalse
39A master budget is most useful in evaluating a manager’s performance in controlling costs.
- ATrue
- BFalse
40static budget is one that is geared to one level of activity.
- ATrue
- BFalse
41A static budget is changed only when actual activity is different from the level of activity expected.
- ATrue
- BFalse
42A static budget is most useful for evaluating a manager’s performance in controlling variable costs.
- ATrue
- BFalse
43A flexible budget can be prepared for each of the types of budgets included in the master budget.
- ATrue
- BFalse
44A flexible budget is a series of static budgets at different levels of activitie
- ATrue
- BFalse
45Flexible budgeting relies on the assumption that unit variable costs will remain constant within the relevant range of activity.
- ATrue
- BFalse
46What is budgetary control?
- AAnother name for a flexible budget
- BThe degree to which the CFO controls the budge
- CThe use of budgets in controlling operations
- DThe process of providing information on budget differences to lower level managers
47A major element in budgetary control is
- Athe preparation of long-term plans.
- Bthe comparison of actual results with planned objectives
- Cthe valuation of inventories
- Dapproval of the budget by the stockholders.
48Budget reports should be prepare
- Amonthly
- Bdaily
- Cweekly
- Das frequently as needed
49On the basis of the budget reports,
- Amanagement analyzes differences between actual and planned results.
- Bmanagement may take corrective action
- Cmanagement may modify the future plans.
- DAll of these answers are correct.
50The purpose of the departmental overhead cost report is to
- Acontrol indirect labor costs.
- Bcontrol selling expense.
- Cdetermine the efficient use of materials.
- Dcontrol overhead costs.
51The purpose of the sales budget report is to
- Acontrol selling expenses.
- Bdetermine whether income objectives are being met.
- Cdetermine whether sales goals are being met
- Dcontrol sales commissions.
52The comparison of differences between actual and planned results
- Ais done by the external auditors
- Bappears on the company’s external financial statements.
- Cis usually done orally in departmental meetings.
- Dappears on periodic budget reports.
53A static budget
- Ashould not be prepared in a company.
- Band planned variable costs.
- Cshows planned results at the original budgeted activity level.
- Dis changed only if the actual level of activity is different than originally budgeted.
54A static budget report
- Ashows costs at only 2 or 3 different levels of activity.
- Bis appropriate in evaluating a manager’s effectiveness in controlling variable costs
- Cmaster budget activy level
- Dmay be appropriate in evaluating a manager’s effectiveness in controlling costs when the behavior of the costs in response to changes in activity is fixed.
55 A static budget is appropriate in evaluating a manager’s performance if
- Aactual activity closely approximates the master budget activity.
- Bactual activity is less than the master budget activity.
- Cthe company prepares reports on an annual basis.
- Dthe company is a not-for-profit organization.
56When budgeted and actual results are not the same amount, there is a budget
- Aerror
- Bdifference
- Canomaly
- Dby-product
57Top management’s reaction to a difference between budgeted and actual sales often depends on
- Awhether the difference is favorable or unfavorable.
- Bwhether management anticipated the difference.
- Cthe materiality of the difference.
- Dthe personality of the top managers.
58 If costs are not responsive to changes in activity level, then these costs can be best described as
- Amixed
- Bflexible
- Cvariable
- Dfixed
59Assume that actual sales results exceed the planned results for the second quarter. This favorable difference is greater than the unfavorable difference reported for the first quarter sales. Which of the following statements about the sales budget report on June 30 is true?
- AThe year-to-date results will show a favorable difference
- BThe year-to-date results will show an unfavorable difference.
- CThe difference for the first quarter can be ignored.
- DThe sales report is not useful if it shows a favorable and unfavorable difference for the two quarters.
60A static budget is appropriate for
- Avariable overhead costs
- Bdirect materials costs
- Cfixed overhead costs
- Dnone of the above
61A static budget is appropriate for
- AThe static budget contains only fixed costs, while the flexible budget contains only variable costs
- Badjusted for different activity levels
- CThe static budget is constructed using input from only upper level management, while a flexible budget obtains input from all levels of management.
- DThe static budget is prepared only for units produced, while a flexible budget reflects the number of units sold.
62Another name for the static budget is
- Amaster budget
- Boverhead budget
- Cpermanent budget
- Dflexible budget
63Total budgeted fixed costs appearing on a flexible budget will be the same amount as total fixed costs on the master budget.
- ATrue
- BFalse
64A flexible budget is prepared before the master budget.
- ATrue
- BFalse
65The activity index used in preparing a flexible budget should not influence the variable costs that are being budgeted.
- ATrue
- BFalse
66A formula used in developing a flexible budget is: Total budgeted cost = fixed cost + (total variable cost per unit × activity level).
- ATrue
- BFalse
67Flexible budgets are widely used in production and service departments
- ATrue
- BFalse
68A flexible budget report will show both actual and budget cost based on the actual activity level achieved.
- ATrue
- BFalse
69Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.
- ATrue
- BFalse
70Policies regarding when a difference between actual and planned results should be investigated are generally more restrictive for noncontrollable items than for controllable items.
- ATrue
- BFalse
71Budget reports provide the feedback needed by management to see whether actual operations are on course.
- ATrue
- BFalse
72A static budget is an effective means to evaluate a manager’s ability to control costs, regardless of the actual activity level.
- ATrue
- BFalse
73The flexible budget report evaluates a manager’s performance in two areas: (1) production and (2) costs.
- ATrue
- BFalse
74Which one of the following would be the same total amount on a flexible budget and a static budget if the activity level is different for the two types of budgets?
- ADirect materials cost
- Bdirect labor cost
- Cvariable manufacturing overhead
- Dfixed manufacturing overhead
75In developing a flexible budget within a relevant range of activity,
- Aonly fixed costs are included.
- Bit is necessary to relate variable cost data to the activity index chosen
- Cit is necessary to prepare a budget at 1,000 unit increments.
- Dvariable and fixed costs are combined and are reported as a total cost.
76What budgeted amounts appear on the flexible budget?
- AOriginal budgeted amounts at the static budget activity level
- BActual costs for the budgeted activity level
- CBudgeted amounts for the actual activity level achieved
- DActual costs for the estimated activity level
77The flexible budget
- Ais prepared before the master budget.
- Bis relevant both within and outside the relevant range.
- Celiminates the need for a master budget.
- Dis a series of static budgets at different levels of activity.
78A flexible budget can be prepared for which of the following budgets comprising the master budget?
- Asales
- Boverhead
- Cdirect materials
- Dall of the above
79 A flexible budget
- Ais prepared when management cannot agree on objectives for the company.
- Bprojects budget data for various levels of activity.
- Cis only useful in controlling fixed costs
- Dcannot be used for evaluation purposes because budgeted data are adjusted to reflect actual results
80Management by exception
- Acauses managers to be buried under voluminous paperwork
- Bmeans that all differences will be investigated.
- Cmeans that only unfavorable differences will be investigated.
- Dmeans that material differences will be investigated.
81Under management by exception, which differences between planned and actual results should be investigated?
- AMaterial and noncontrollable
- BControllable and noncontrollable
- CMaterial and controllable
- DAll differences should be investigated
82The activity index used in preparing the flexible budget
- Ais prescribed by generally accepted accounting principles.
- Bis only applicable to fixed manufacturing costs.
- Cis the same for all departments.
- Dshould significantly influence the costs that are being budgeted.
83A static budget is not appropriate in evaluating a manager’s effectiveness if a company has
- Asubstantial fixed costs
- Bsubstantial variable costs
- Cplanned activity levels that match actual activity levels
- Dno variable costs
84Which of the following would not be considered an aspect of budgetary control?
- AIt assists in the determination of differences between actual and planned results.
- BIt provides feedback value needed by management to see whether actual operations are on course.
- Cassists management in controlling operations.
- DIt provides a guarantee for favorable results.
85 static budget is usually appropriate in evaluating a manager’s effectiveness in controllin
- Afixed manufacturing costs and fixed selling and administrative expenses.
- Bvariable manufacturing costs and variable selling and administrative expenses.
- Cfixed manufacturing costs and variable selling and administrative expenses.
- Dvariable manufacturing costs and fixed selling and administrative expenses.
86A static budget report is appropriate for
- Aonly fixed manufacturing costs.
- Bonly fixed selling and administrative expenses.
- Cvariable selling and administrative expenses
- Dboth fixed manufacturing costs and fixed selling and administrative expenses.
87To develop the flexible budget, management takes all of the following steps except identify the
- Aactivity index and the relevant range of activity.
- Bvariable costs and determine the budgeted variable cost per unit
- Cfixed costs and determine the budgeted fixed cost per unit.
- DAll of these options are steps in developing the flexible budget
88A flexible budget is appropriate fo
- Ano no
- Byes yes
- Cyes no
- Dno yes
89All of the following statements are correct about management by exception except it
- Aenables top management to focus on problem areas that need attention.
- Bmeans that management has to investigate every budget difference.
- Crequires that there must be some guidelines for identifying an exception.
- Dmeans that top management’s review of a budget report is focused primarily on differences between actual results and planned objectives.
90A planning budget is prepared before the period begins and is valid for whatever the actual level of activity turns out to be
- ATrue
- BFalse
91Comparing a static planning budget to actual costs is a good way to assess whether variable costs are under control.
- ATrue
- BFalse
92Directly comparing a static planning budget to actual costs helps to distinguish between differences in costs that are due to changes in activity and differences that are due to how well costs were controlled.
- ATrue
- BFalse
93Fixed costs should be ignored when evaluating how well a manager has controlled costs.
- ATrue
- BFalse
94Fixed costs should be included in a flexible budget even though they do not change when the level of activity changes.
- ATrue
- BFalse
95When a flexible budget is used in performance evaluation, actual costs are compared to the static planning budget rather than to what the costs should have been for the actual level of activity during the period.
- ATrue
- BFalse
96A flexible budget should not be used when making comparisons to actual results such as actual expenses.
- ATrue
- BFalse
97A flexible budget cannot be used to estimate what costs should have been at a given level of activity.
- ATrue
- BFalse
98A flexible budget can be used to estimate what revenues and costs should have been, given the actual level of activity for the period.
- ATrue
- BFalse
99A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period.
- ATrue
- BFalse
100A revenue variance is favorable if the actual revenue exceeds what the revenue should have been for the actual level of activity of the period.
- ATrue
- BFalse
101 A revenue variance is unfavorable if the actual revenue is less than the revenue in the static planning budget.
- ATrue
- BFalse
102 An unfavorable spending variance may reflect waste as well as paying too much for inputs.
- ATrue
- BFalse
103The revenue and spending variances are the differences between the flexible budget and the actual results for the period.
- ATrue
- BFalse
104A major weakness of flexible budgets is that:
- Athey are valid for only a single level of activity.
- Bthey are ignored fixed costs
- Cthey compare actual costs at one level of activity to budgeted costs at a different level of activity.
- Dnone of these is a major weakness of flexible budgets
105Comparing actual results to a budget based on the actual activity for the period is possible with the use of a:
- AMonthly budget
- Bmaster budget
- Cflexible budget
- Drolling budget
106A static planning budget is
- Aa budget for a single level of activity.
- Ba budget that ignores inflation.
- Cused only for fixed costs.
- Dused when the mix of products does not change.
107Which of the following comparisons best isolates the impact that changes in operating efficiency have on performance?
- Astatic planning budget and flexible budget
- Bstatic planning budget and actual results
- Cflexible budget and actual results
- Dmaster budget and static planning budget
108Which of the following would produce a materials price variance?
- AAn excess quantity of materials used.
- BAn excess number of direct labor-hours worked in completing a job.
- CShipping materials to the plant by air freight rather than by truck.
- DBreakage of materials in production.
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- Quiz on Untitled, created by gabe pelak on 27/06/2017.
- Author
- gabe pelak
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