Deck 6: Master Budget and Responsibility Accounting

Question 1

Budgeting includes only the financial aspects of the plan and NOT any nonfinancial aspects such as the number of physical units manufactured.

Answer 1

False

Question 2

Operating decisions deal with how to obtain the funds to acquire resources.

Answer 2

False

Question 3

Budgeted financial statements are also referred to as pro forma statements.

Answer 3

True

Question 4

Budgets can play both planning and control roles for management.

Question 5

Operating decisions primarily deal with:

A)the use of scarce resources
B)how to obtain funds to acquire resources
C)acquiring equipment and buildings
D)satisfying stockholders

Question 6

A master budget:

A)includes only financial aspects of a plan and excludes nonfinancial aspects
B)is an aid to coordinating what needs to be done to implement a plan
C)includes broad expectations and visionary results
D)should not be altered after it has been agreed upon

Question 7

If initial budgets prove UNACCEPTABLE, planners achieve the most benefit from:

A)planning again in light of feedback and current conditions
B)deciding not to budget this year
C)accepting an unbalanced budget
D)using last year's budget

Question 8

Financing decisions primarily deal with:

A)the use of scarce resources
B)how to obtain funds to acquire resources
C)acquiring equipment and buildings
D)preparing financial statements for stockholders

Question 9

Long-run planning and short-run planning are best performed independently of each other.

Question 10

A budget:

A)is the quantitative expression of a proposed plan of action by management
B)is an aid to coordinate what needs to be done
C)generally includes both financial and nonfinancial aspects of the plan
D)All of the above are correct.

Question 11

Budgeting provides all of the following EXCEPT:

A)a means to communicate the organization's short-term goals to its members
B)support for the management functions of planning and coordination
C)a means to anticipate problems
D)an ethical framework for decision making

Question 12

A budget generally includes both financial and nonfinancial aspects of the
plan.

Question 13

Financing decisions deal with how to best use the limited resources of an organization.

Question 14

A budget is the quantitative expression of a proposed plan of action by management
for a specified period.

Question 15

Budgeting is used to help companies:

A)plan to better satisfy customers
B)anticipate potential problems
C)focus on opportunities
D)All of these answers are correct.

Question 16

Budgeting helps management anticipate and adjust for trouble spots in advance.

Question 17

A budget

A)is the quantitative expression of a proposed plan of action.
B)aids in coordinating what needs to be done.
C)includes both financial and nonfinancial aspects.
D)All of these answers are correct.

Question 18

A good budgeting system forces managers to examine the business as they plan, so they can:

A)detect inaccurate historical records
B)set specific expectations against which actual results can be compared
C)complete the budgeting task on time
D)get promoted for doing a good job

Question 19

Budgeted financial statements are called pro forma statements.

Question 20

Operating budgets and financial budgets:

A)combined form the master budget
B)are prepared before the master budget
C)are prepared after the master budget
D)have nothing to do with the master budget

Question 21

A budget can help implement:

A)strategic planning
B)long-run planning
C)short-run planning
D)All of these answers are correct.

Question 22

To gain the benefits of budgeting ________ must understand and support the budget.

A)senior management
B)middle management
C)line employees
D)All of these answers are correct.

Question 23

Line managers who feel that top management does NOT believe in the budget are most likely to:

A)pick up the slack and participate in the budgeting process
B)be motivated by the budget
C)spend little time on the budgeting process
D)convert the budget to a shorter more reasonable time period

Question 24

Coordination is meshing and balancing all aspects of production or service and all
departments in a company in the best way for the company to meet its goals.

Question 25

A company's actual performance should be compared against budgeted amounts for the same accounting period so that:

A)adjustments for future conditions can be included
B)no feedback is possible
C)inefficiencies of the past year can be included
D)a rolling budget can be implemented

Question 26

Lower-level managers will not actively participate in the budget process if they perceive upper management does NOT believe in the process.

Question 27

Challenging budgets tend to:

A)decrease line-management participation in attaining corporate goals
B)increase failure
C)increase anxiety without motivation
D)motivate improved performance

Question 28

It is advantageous to coordinate budgets with:

A)suppliers
B)customers
C)the marketing and production departments
D)All of these answers are correct.

Question 29

Budgets should:

A)be flexible
B)be administered rigidly
C)only be developed for short periods of time
D)include only variable costs

Question 30

Even in the face of changing conditions, attaining the original budget is critical.

Question 31

Participation of employees in the budgeting process helps to create:

A)greater commitment
B)greater anxiety
C)less commitment
D)better past performance

Question 32

Bob and Dale have just purchased a small honey manufacturing company that was having financial difficulties. After a brief operating period, they decided that the company's main problem was the lack of any financial planning. The company made a good product and market potential was great.
Required:
Explain why a company needs a good budgeting plan. Specifically address the need for a master budget.

Question 33

The time coverage of a budget should be:

A)one year
B)guided by the purpose of the budget
C)cover design through manufacture and sale of the product
D)shorter rather than longer

Question 34

A budget can do all of the following EXCEPT:

A)promote coordination among subunits
B)determine actual profitability
C)motivate managers
D)motivate employees

Question 35

Describe the benefits to an organization of preparing an operating budget.

Question 36

Actual results should NOT be compared against past performance because:

A)past results may contain mistakes and substandard performance
B)past results will never happen again
C)past performance is an indicator of future performance
D)future conditions will be similar to past conditions

Question 37

A budget should/can do all of the following EXCEPT:

A)be prepared by managers from different functional areas working independently of each other
B)be adjusted if new opportunities become available during the year
C)help management allocate limited resources
D)become the performance standard against which firms can compare the actual results

Question 38

A limitation of comparing a company's performance against actual results of last year is that:

A)it includes adjustments for future conditions
B)feedback is no longer a possibility
C)past results can contain inefficiencies of the past year
D)the budgeting time period is set at one year

Question 39

Rolling budgets help management to:

A)better review the past calendar year
B)deal with a 5-year time frame
C)focus on the upcoming budget period
D)rigidly administer the budget

Question 40

After a budget is agreed upon and finalized by the management team, the amounts should NOT be changed for any reason.

Question 41

Research shows that challenging budgets improve employee performance because employees view falling short of budgeted numbers as a failure.

Question 42

The budgeting process is most strongly influenced by:

A)the capital budget
B)the budgeted statement of cash flows
C)the sales forecast
D)the production budget

Question 43

In which order are the following developed? First to last:

A)ABDC
B)DABC
C)DCAB
D)CABD

Question 44

Budgeted production equals:

A)beginning finished goods inventory + budgeted unit sales - targeted ending finished goods inventory
B)targeted ending finished goods inventory + beginning finished goods inventory - budgeted unit sales
C)budgeted unit sales + targeted ending finished goods inventory - beginning finished goods inventory
D)budgeted unit sales + targeted ending finished goods inventory + beginning finished goods inventory

Question 45

The sales forecast should be primarily based on:

A)statistical analysis.
B)input from sales managers and sales representatives
C)production capacity
D)input from the board of directors

Question 46

Operating budgets include all of the following EXCEPT:

A)the revenues budget
B)the budgeted income statement
C)the administrative costs budget
D)the budgeted balance sheet

Question 47

Which budget is NOT necessary to prepare the budgeted balance sheet?

A)cash budget
B)budgeted statement of cash flows
C)budgeted income statement
D)revenues budget

Question 48

When administered wisely, budgets promote communication and coordination among the various subunits of the organization.

Question 49

The sales forecast is influenced by:

A)advertising and sales promotions
B)competition
C)general economic conditions
D)All of these answers are correct.

Question 50

________ includes a budgeted statement of cash flows and a budgeted balance sheet.

A)An annual report
B)The financial budget
C)The operating budget
D)The capital expenditures budget

Question 51

Financial budgets include the all of the following EXCEPT:

A)capital expenditures budget
B)budgeted income statement
C)budgeted balance sheet
D)budgeted statement of cash flows

Question 52

________ is the usual starting point for budgeting.

A)The revenues budget
B)Net income
C)The production budget
D)The cash budget

Question 53

The number of units in the sales budget and the production budget may differ because of a change in:

A)finished goods inventory levels
B)overhead charges
C)direct material inventory levels
D)sales returns and allowances

Question 54

A sales forecast is:

A)often the outcome of elaborate information gathering and discussions among sales managers
B)developed primarily to prepare next year's marketing campaign
C)solely based on sales of the previous year
D)a summary of product costs that influence pricing decisions

Question 55

Production is primarily based on:

A)projected inventory levels
B)the revenues budget
C)the administrative costs budget
D)the capital expenditures budget

Question 56

The operating budget process generally concludes with the preparation of the:

A)production budget
B)distribution budget
C)research and development budget
D)budgeted income statement

Question 57

Operating budgets include the:

A)budgeted balance sheet
B)budgeted income statement
C)capital expenditures budget
D)budgeted statement of cash flows

Question 58

The order to follow when preparing the operating budget is:

A)revenues budget, production budget, and direct manufacturing labor costs budget
B)costs of goods sold budget, production budget, and cash budget
C)revenues budget, manufacturing overhead costs budget, and production budget
D)cash expenditures budget, revenues budget, and production budget.

Question 59

The revenues budget identifies:

A)expected cash flows for each product
B)actual sales from last year for each product
C)the expected level of sales for the company
D)the variance of sales from actual for each product

Question 60

It is best to compare this year's performance with last year's actual performance rather than this year's budget.

Question 61

Budgeted manufacturing overhead costs include all types of factory expenses EXCEPT:

A)fixed items such as depreciation of manufacturing machinery
B)variable items such as plant supplies
C)indirect labor such as the salary of the plant supervisor
D)direct labor and direct materials

Question 62

Answer the following questions using the information below:
Elton, Inc., expects to sell 6,000 ceramic vases for $40 each. Direct materials costs are $4, direct manufacturing labor is $20, and manufacturing overhead is $6 per vase. The following inventory levels apply to 2011:

What are the 2012 budgeted costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively?

A)$24,400; $122,000; $36,600
B)$24,000; $120,000; $36,000
C)$4,000; $20,000; $6,000
D)$4,000; $0; $9,000

Question 63

Answer the following questions using the information below:
Kason, Inc., expects to sell 20,000 pool cues for $24.00 each. Direct materials costs are $4.00, direct manufacturing labor is $8.00, and manufacturing overhead is $1.60 per pool cue. The following inventory levels apply to 2011:

How many pool cues need to be produced in 2012?

A)22,500 cues
B)22,000 cues
C)20,500 cues
D)19,500 cues

Question 64

Direct material purchases equal:

A)production needs
B)production needs plus target ending inventories
C)production needs plus beginning inventories
D)production needs plus target ending inventories less beginning inventories

Question 65

The direct materials usage budget is based on:

A)the units to be produced during a period
B)budgeted sales dollars
C)the predetermined factory overhead rate
D)the amount of labor-hours worked

Question 66

Answer the following questions using the information below:
Kason, Inc., expects to sell 20,000 pool cues for $24.00 each. Direct materials costs are $4.00, direct manufacturing labor is $8.00, and manufacturing overhead is $1.60 per pool cue. The following inventory levels apply to 2011:

On the 2012 budgeted income statement, what amount will be reported for sales?

A)$492,000
B)$480,000
C)$624,000
D)$636,000

Question 67

Answer the following questions using the information below:
Kason, Inc., expects to sell 20,000 pool cues for $24.00 each. Direct materials costs are $4.00, direct manufacturing labor is $8.00, and manufacturing overhead is $1.60 per pool cue. The following inventory levels apply to 2011:

On the 2012 budgeted income statement, what amount will be reported for cost of goods sold?

A)$278,800
B)$272,000
C)$265,200
D)$306,000

Question 68

Answer the following questions using the information below:
The following information pertains to the January operating budget for Casey Corporation, a retailer:

For January, budgeted gross margin is:

A)$100,000
B)$140,000
C)$60,000
D)$50,000

Question 69

Answer the following questions using the information below:
Elton, Inc., expects to sell 6,000 ceramic vases for $40 each. Direct materials costs are $4, direct manufacturing labor is $20, and manufacturing overhead is $6 per vase. The following inventory levels apply to 2011:

On the 2012 budgeted income statement, what amount will be reported for cost of goods sold?

A)$183,000
B)$210,000
C)$180,000
D)$177,000

Question 70

Answer the following questions using the information below:
Elton, Inc., expects to sell 6,000 ceramic vases for $40 each. Direct materials costs are $4, direct manufacturing labor is $20, and manufacturing overhead is $6 per vase. The following inventory levels apply to 2011:

On the 2012 budgeted income statement, what amount will be reported for sales?

A)$244,000
B)$236,000
C)$280,000
D)$240,000

Question 71

Wilcox Company has budgeted sales volume of 60,000 units and budgeted production of 54,000 units, while 10,000 units are in beginning finished goods inventory. How many units are targeted for ending finished goods inventory?

A)10,000 units
B)16,000 units
C)6,000 units
D)4,000 units

Question 72

Grandma's Baskets Company expects to manufacture and sell 50,000 baskets in 2011 for $5 each. There are 4,000 baskets in beginning finished goods inventory with target ending inventory of 4,000 baskets. The company keeps no work-in-process inventory. What amount of sales revenue will be reported on the 2011 budgeted income statement?

A)$246,000
B)$250,000
C)$254,000
D)$258,000

Question 73

Individual budgeted amounts included in the manufacturing overhead costs budget are based on input from:

A)operating personnel
B)costs incurred in prior years
C)cost changes expected in the future
D)All of these answers are correct.

Question 74

For next year, Manzo, Inc., has budgeted sales of 30,000 units, target ending finished goods inventory of 1,500 units, and beginning finished goods inventory of 900 units. All other inventories are zero. How many units should be produced next year?

A)29,400 units
B)30,000 units
C)30,600 units
D)32,400 units

Question 75

The manufacturing overhead costs budget includes budgeted amounts for:

A)indirect materials
B)indirect manufacturing labor
C)depreciation on factory equipment
D)All of these answers are correct.

Question 76

Answer the following questions using the information below:
Elton, Inc., expects to sell 6,000 ceramic vases for $40 each. Direct materials costs are $4, direct manufacturing labor is $20, and manufacturing overhead is $6 per vase. The following inventory levels apply to 2011:

How many ceramic vases need to be produced in 2012?

A)5,900 vases
B)6,100 vases
C)7,000 vases
D)6,000 vases

Question 77

The cost of goods sold budget requires all of the following budgets EXCEPT:

A)direct material cost budget
B)manufacturing overhead cost budget
C)distribution cost budget
D)direct manufacturing labor cost budget

Question 78

Basile Corporation has budgeted sales of 36,000 units, target ending finished goods inventory of 6,000 units, and beginning finished goods inventory of 1,800 units. How many units should be produced next year?

A)43,800 units
B)40,200 units
C)31,800 units
D)36,000 units

Question 79

Answer the following questions using the information below:
The following information pertains to the January operating budget for Casey Corporation, a retailer:

For January, the amount budgeted for the nonmanufacturing costs budget is:

A)$78,000
B)$10,000
C)$168,000
D)$18,000

Question 80

Answer the following questions using the information below:
Kason, Inc., expects to sell 20,000 pool cues for $24.00 each. Direct materials costs are $4.00, direct manufacturing labor is $8.00, and manufacturing overhead is $1.60 per pool cue. The following inventory levels apply to 2011:

What are the 2012 budgeted costs for direct materials, direct manufacturing labor, and manufacturing overhead, respectively?

A)$0; $192,000; $38,400
B)$78,000; $156,000; $31,200
C)$160,000; $80,000; $32,000
D)$82,000; $164,000; $32,800