ACC 560 Week 7 Quiz 9
TRUE-FALSE STATEMENTS
1. Budgets are statements of management’s plans stated in financial terms.
2. A benefit of budgeting is that it provides definite objectives for evaluating performance.
3. A budget can be a means of communicating a company’s objectives to external parties.
4. A budget can be used as a basis for evaluating performance.
5. A well-developed budget can operate and enforce itself.
6. The budget itself and the administration of the budget are the responsibility of the accounting department.
7. Effective budgeting requires clearly defined lines of authority and responsibility.
8. The flow of input data for budgeting should be from the highest levels of responsibility to the lowest.
9. Budgets can have a positive or negative effect on human behavior depending on the manner in which the budget is developed and administered.
10. A budget can facilitate the coordination of activities among the segments of a large company.
11. The longer the budget period, the more reliable the estimates of future outcomes.
12. The budget committee has the responsibility for coordinating the preparation of the budget.
13. The budget is developed within the framework of a sales forecast.
14. Budgeting and long-range planning are two terms that describe the same process.
15. Long-range plans are used more as a review of progress toward long-term goals rather than an evaluation of specific results to be achieved.
16. The master budget reflects management’s long-term plans encompassing five years or more.
17. The master budget consists of operating and financial budgets.
18. Financial budgets must be completed before the operating budgets can be prepared.
19. The direct materials budget must be completed before the production budget because the quantity of materials available for production must be known.
20. The number of direct labor hours needed for production is obtained from the production budget.
21. A manufacturing overhead budget is not needed if the company develops a predeter-mined overhead rate to apply overhead.
22. The manufacturing overhead budget generally has separate sections for variable, mixed, and fixed costs.
23. A production budget should be prepared before the sales budget.
24. The direct materials budget contains both quantity and cost data.
25. The budgeted income statement indicates the expected profitability of operations for the next year.
26. If a monthly cash budget is prepared properly, there will never be a cash deficiency at the end of any month.
27. The budgeted balance sheet is prepared entirely from the budgets for the current year.
28. The starting point when budgeting for a not-for-profit organization is generally to budget expenditures first.
29. A merchandiser has a merchandise purchases budget rather than a production budget.
30. A critical factor in budgeting for a service firm is to determine the amount of products to purchase.
31. The budget itself and the administration of the budget are entirely accounting responsibilities.
32. Financial planning models and statistical and mathematical techniques may be used in forecasting sales.
33. The direct materials budget is derived from the direct materials units required for production plus desired ending direct materials units less beginning direct materials units.
34. The manufacturing overhead budget shows the expected manufacturing overhead costs.
35. In order to develop a budgeted balance sheet, the previous year’s balance sheet is needed.
36. In service enterprises, the critical factor in budgeting is coordinating materials and equipment with anticipated services.
MULTIPLE CHOICE QUESTIONS
37. Why are budgets useful in the planning process?
a. They provide management with information about the company’s past performance.
b. They help communicate goals and provide a basis for evaluation.
c. They guarantee the company will be profitable if it meets its objectives.
d. They enable the budget committee to earn their paycheck.
38. A budget
a. is a substitute for management.
b. is an aid to management.
c. can operate or enforce itself.
d. is the responsibility of the accounting department.
39. Accounting generally has the responsibility for
a. setting company goals.
b. expressing the budget in financial terms.
c. enforcing the budget.
d. administration of the budget.
40. Which one of the following is not a benefit of budgeting?
a. It facilitates the coordination of activities.
b. It provides definite objectives for evaluating performance.
c. It provides assurance that the company will achieve its objectives.
d. It requires all levels of management to plan ahead on a recurring basis.
41. Budgeting is usually most closely associated with which management function?
a. Planning
b. Directing
c. Motivating
d. Controlling
42. Which of the following items does not follow from the adoption of a budget?
a. Promote efficiency
b. Deterrent to waste
c. Basis for performance evaluation
d. Guarantee of accomplishing the profit objective
43. Which is true of budgets?
a. They are voted on and approved by stockholders.
b. They are used in the planning, but not in the control, process.
c. There is a standard form and structure for budgets.
d. They are used in performance evaluation.
44. A common starting point in the budgeting process is
a. expected future net income.
b. past performance.
c. to motivate the sales force.
d. a clean slate, with no expectations.
45. If budgets are to be effective, all of the following must be present except
a. acceptance at all levels of management.
b. research and analysis in setting realistic goals.
c. stockholders’ approval of the budget.
d. sound organizational structure.
46. If budgets are to be effective, there must be
a. a history of successful operations.
b. independent verification of budget goals.
c. an organizational structure with clearly defined lines of authority and responsibility.
d. excess plant capacity.
47. It is important that budgets be accepted by
a. division managers.
b. department heads.
c. supervisors.
d. All of these.
48. Which of the following statements about budget acceptance in an organization is true?
a. The most widely accepted budget by the organization is the one prepared by top management.
b. The most widely accepted budget by the organization is the one prepared by the department heads.
c. Budgets are hardly ever accepted by anyone except top management.
d. Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process.
49. Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable?
a. Department managers should be held accountable for all variances from budgets for their departments.
b. Department managers should only be held accountable for controllable variances for their departments.
c. Department managers should be credited for favorable variances even if they are beyond their control.
d. Department managers’ performances should not be evaluated based on actual results to budgeted results.
50. An unrealistic budget is more likely to result when it
a. has been developed in a top down fashion.
b. has been developed in a bottom up fashion.
c. has been developed by all levels of management.
d. is developed with performance appraisal usages in mind.
51. A budget is most likely to be effective if
a. it is used to assess blame when things do not occur according to plans.
b. it is not used to evaluate a manager’s performance.
c. employees and managers at the lower levels do not get involved in the budgeting process.
d. it has top management support.
52. In many companies, responsibility for coordinating the preparation of the budget is assigned to
a. the company’s independent certified public accountants.
b. the company’s internal auditors.
c. the company’s board of directors.
d. a budget committee.
53. A budget period should be
a. monthly.
b. for a year or more.
c. long-term.
d. long enough to provide an obtainable goal under normal business conditions.
54. If a company has adopted continuous budgeting, the budget will show plans for
a. every day.
b. a full year ahead.
c. the current year and the next year.
d. at least five years.
55. The most common budget period is
a. one month.
b. three months.
c. six months.
d. one year.
56. Budget development for the coming year usually starts
a. a year in advance.
b. the first month of the year to be budgeted.
c. several months before the end of the current year.
d. the last month of the previous year.
57. The budget committee would not normally include the
a. research director.
b. treasurer.
c. sales manager.
d. external auditor.
58. The budget committee in a company is often headed by the
a. president.
b. controller.
c. treasurer.
d. budget director.
59. Long-range planning
a. generally presents more detailed information than an annual budget.
b. generally encompasses a longer period of time than an annual budget.
c. is usually more accurate than an annual budget.
d. is prepared on a quarterly basis if the budget is prepared on a quarterly basis.
60. Long-range planning usually encompasses a period of at least
a. six months.
b. 1 year.
c. 5 years.
d. 10 years.