Deck 11: Budgeting, Management Control and Responsibility Accounting

Question 1

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

Answer 1

False

Question 2

Few businesses plan to fail,but many of those that don't succeed have failed to plan.

Answer 2

True

Question 3

Budgeting is most useful when it is integrated with a company's strategy.

Answer 3

True

Question 4

Budgets help managers assess strategic risks and opportunities (including both environmental and social opportunities)by providing them with feedback about the likely effects of their strategies and plans.

Question 5

Which of the following does budgeting NOT provide?

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

Question 6

The master budget expresses management's ________ and financial plans for a specified period.

A)strategic
B)learning
C)controllable
D)operating

Question 7

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

Question 8

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)get promoted for doing a good job.
D)complete the budgeting task on time.

Question 9

If initial budget estimates prove unacceptable,planners achieve the MOST benefit from:

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

Question 10

Which of the following regarding operating budgets and financial budgets is TRUE?

A)Combined from the master budget
B)Are prepared after the master budget
C)Are prepared before the master budget
D)Have nothing to do with the master budget

Question 11

Operating decisions deal with how to best use the limited resources of an organisation.

Question 12

A budget:

A)generally includes both financial and non-financial aspects of the plan.
B)is the quantitative expression of a proposed plan of action by management.
C)serves as a blueprint for the company to follow in an upcoming period.
D)is an aid to coordinate what needs to be done.
E)All of the above are correct.

Question 13

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

Question 14

Examples of non-financial budgets include all of the following EXCEPT:

A)units sold
B)cash collections from customers
C)units manufactured
D)number of new products introduced

Question 15

Well-managed companies usually cycle through the four budgeting steps during the course of the financial year:

Question 16

Budgeting includes only the financial aspects of the plan and not any non-financial aspects such as the number of physical units manufactured.

Question 17

Operating decisions PRIMARILY deal with:

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

Question 18

Financing decisions PRIMARILY deal with:

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

Question 19

At the end of the financial year,managers and management accountants take into account which of the following as they begin to make plans for the next period?

A)Market feedback
B)Changed conditions
C)Their own experiences
D)All of these answers are correct.

Question 20

The master budget reflects the impact of operating decisions,but not financing decisions.

Question 21

Actual results should NOT be compared against past performance because:

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

Question 22

As employees get closer to a goal,they:

A)relax.
B)tell their friends.
C)set a new goal.
D)work harder to achieve it.

Question 23

Budgets should not be administered rigidly,as changing conditions usually call for changes in plans.

Question 24

Which of the following can a budget not do?

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

Question 25

After management has agreed upon and finalised the budget,the amounts should not be changed for any reason.

Question 26

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

Question 27

Budgets should:

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

Question 28

One of the most valuable benefits of budgeting is that it helps managers:

A)communicate.
B)learn.
C)develop new strategies.
D)acquire power.

Question 29

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

A)customers
B)management at all levels
C)suppliers
D)All of these answers are correct.

Question 30

Budgeting is a time-consuming process that involves all levels of management.

Question 31

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

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

Question 32

Which of the following do challenging budgets tend to do?

A)Reduce learning
B)Motivate improved performance
C)Reduce coordination
D)Decrease line-management participation in attaining corporate goals

Question 33

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

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

Question 34

Top management support is critical for obtaining lower-level management's participation in the formulation of budgets and for successful administration of budgets.

Question 35

Participation creates greater ________ and accountability towards the budget among lower-level managers.

A)resistance
B)animosity
C)concern
D)commitment

Question 36

Alberto and Marko have just purchased a small soap 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 37

A budget can do all of the following EXCEPT:

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

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)past results can contain inefficiencies of the past year.
C)feedback is no longer a possibility.
D)the budgeting time period is set at one year.

Question 39

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

Question 40

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

Question 41

________ approaches,such as regression and trend analysis,can help in sales forecasting.

A)Behavioural
B)Historical
C)Empirical
D)Statistical

Question 42

The sales forecast should be PRIMARILY based on:

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

Question 43

The direct materials quantities _____________ depend on the efficiency with which materials are consumed to produce a product.

A)purchased
B)sold
C)estimated
D)used

Question 44

The order to follow when preparing the operating budget is:

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

Question 45

The cash budget and the budgeted income statement can be used to prepare two other summary financial statements-the budgeted balance sheet and the budgeted ________.

A)bank statement.
B)income statement.
C)statement of cash flows.
D)operating budget.

Question 46

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

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

Question 47

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

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

Question 48

Which of the following does the financial budget include?

A)Marketing costs budget
B)Administrative costs budget
C)Capital expenditures budget
D)Production budget

Question 49

The time coverage of a budget should be:

A)one year.
B)guided by the purpose of the budget.
C)longer rather than shorter.
D)covered by the period of the design,manufacture and sale of the product.

Question 50

A rolling budget is created by continually adding a month,quarter or ___________ to the period that just ended.

A)week
B)year
C)day
D)weekend

Question 51

A sales forecast is:

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

Question 52

Operating budgets include all of the following EXCEPT:

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

Question 53

Budgeted production depends on:

A)budgeted sales and expected changes in inventory levels.
B)the manufacturing overhead costs budget.
C)the direct manufacturing labour budget.
D)the direct materials usage budget and direct material purchases budget.

Question 54

The following budgets are developed in which order (from first to last)?
A = Production budget
B = Direct materials costs budget
C = Budgeted income statement
D = Revenues budget

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

Question 55

Production budget is primarily based on:

A)the revenues budget.
B)the administrative costs budget.
C)the capital expenditures budget.
D)the projected profit.

Question 56

________ is the usual starting point for budgeting.

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

Question 57

The direct materials usage budget is based on:

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

Question 58

A financial budget focuses on how operations and planned capital outlays affect ________.

A)cash.
B)inventory.
C)receivables.
D)payables.

Question 59

The sales forecast is influenced by:

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

Question 60

________ includes a budgeted cash flow statement and a budgeted balance sheet.

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

Question 61

Direct material purchases equal:

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

Question 62

Answer the following questions using the information below:
Pilbara Co Pty Ltd expects to sell 6000 ceramic vases for $20 each.Direct materials costs are $2,direct manufacturing labour is $10,and manufacturing overhead is $3 per vase.The following inventory levels apply to 2017:
$$\begin{array} { l r r } & \text { Beginning inventory } & \text { Ending inventory } \\\text { Direct materials } & 1000 \text { units } & 1000 \text { units } \\\text { Work-in-process inventory } & 0 \text { units } & 0 \text { units } \\\text { Finished goods inventory } & 400 \text { units } & 500 \text { units }\end{array}$$

-On the 2018 budgeted income statement,what amount will be reported for cost of goods sold?

A)$88 500
B)$105 000
C)$90 000
D)$91 500

Question 63

The manufacturing overhead costs budget includes budgeted amounts for:

A)indirect manufacturing labour.
B)direct materials.
C)direct manufacturing labour.
D)All of these answers are correct.

Question 64

Answer the following questions using the information below:
The following information pertains to the January operating budget for Brindabella Corporation,a retailer:
Budgeted sales are $300 000 for January
Collections of sales are 50% in the month of sale and 50% the next month
Cost of goods sold averages 70% of sales
Merchandise purchases total $250 000 in January
Marketing costs are $3000 each month
Distribution costs are $5000 each month
Administrative costs are $10 000 each month
For January,budgeted net profit is:

A)$72 000.
B)$50 000.
C)$52 000.
D)$60 000.

Question 65

Answer the following questions using the information below:
Ku-ring-gai & Co expects to sell 25 000 pool cues for $12.00 each.Direct materials costs are $2.00,direct manufacturing labour is $4.00,and manufacturing overhead is $0.80 per pool cue.The following inventory levels apply to 2017:
$$\begin{array} { l r r } & \text { Beginning inventory } & \text { Ending inventory } \\\text { Direct materials } & 24000 \text { units } & 24000 \text { units } \\\text { Work-in-process inventory } & 0 \text { units } & 0 \text { units } \\\text { Finished goods inventory } & 2000 \text { units } & 2500 \text { units }\end{array}$$

-What are the 2018 budgeted costs for direct materials,direct manufacturing labour,and manufacturing overhead,respectively?

A)$0;$96 000;$19 200
B)$80 000;$40 000;$16 000
C)$39 000;$78 000;$15 600
D)$51 000;$102 000;$20 400

Question 66

Answer the following questions using the information below:
Ku-ring-gai & Co expects to sell 25 000 pool cues for $12.00 each.Direct materials costs are $2.00,direct manufacturing labour is $4.00,and manufacturing overhead is $0.80 per pool cue.The following inventory levels apply to 2017:
$$\begin{array} { l r r } & \text { Beginning inventory } & \text { Ending inventory } \\\text { Direct materials } & 24000 \text { units } & 24000 \text { units } \\\text { Work-in-process inventory } & 0 \text { units } & 0 \text { units } \\\text { Finished goods inventory } & 2000 \text { units } & 2500 \text { units }\end{array}$$

-On the 2018 budgeted income statement,what amount will be reported for sales?

A)$312 000
B)$300 000
C)$246 000
D)$318 000

Question 67

Non-manufacturing costs include:

A)product design.
B)direct materials purchased.
C)direct labour.
D)direct materials used.

Question 68

Answer the following questions using the information below:
Pilbara Co Pty Ltd expects to sell 6000 ceramic vases for $20 each.Direct materials costs are $2,direct manufacturing labour is $10,and manufacturing overhead is $3 per vase.The following inventory levels apply to 2017:
$$\begin{array} { l r r } & \text { Beginning inventory } & \text { Ending inventory } \\\text { Direct materials } & 1000 \text { units } & 1000 \text { units } \\\text { Work-in-process inventory } & 0 \text { units } & 0 \text { units } \\\text { Finished goods inventory } & 400 \text { units } & 500 \text { units }\end{array}$$

-On the 2018 budgeted income statement,what amount will be reported for sales?

A)$122 000
B)$140 000
C)$118 000
D)$120 000

Question 69

Tumbi Umbi Company expects to manufacture and sell 30 000 baskets in 2018 for $6 each.There are 3000 baskets in beginning finished goods inventory with target ending inventory of 4000 baskets.The company keeps no work-in-process inventory.What amount of sales revenue will be reported on the 2018 budgeted income statement?

A)$186 000
B)$180 000
C)$174 000
D)$204 000

Question 70

For next year,Toowong Inc.has budgeted sales of 70 000 units,target ending finished goods inventory of 1000 units,and beginning finished goods inventory of 9800 units.All other inventories are zero.How many units should be produced next year?

A)60 000 units
B)58 800 units
C)61 200 units
D)64 800 units

Question 71

Answer the following questions using the information below:
Pilbara Co Pty Ltd expects to sell 6000 ceramic vases for $20 each.Direct materials costs are $2,direct manufacturing labour is $10,and manufacturing overhead is $3 per vase.The following inventory levels apply to 2017:
$$\begin{array} { l r r } & \text { Beginning inventory } & \text { Ending inventory } \\\text { Direct materials } & 1000 \text { units } & 1000 \text { units } \\\text { Work-in-process inventory } & 0 \text { units } & 0 \text { units } \\\text { Finished goods inventory } & 400 \text { units } & 500 \text { units }\end{array}$$

-How many ceramic vases need to be produced in 2018?

A)6000 vases
B)6100 vases
C)7000 vases
D)5900 vases

Question 72

Answer the following questions using the information below:
Ku-ring-gai & Co expects to sell 25 000 pool cues for $12.00 each.Direct materials costs are $2.00,direct manufacturing labour is $4.00,and manufacturing overhead is $0.80 per pool cue.The following inventory levels apply to 2017:
$$\begin{array} { l r r } & \text { Beginning inventory } & \text { Ending inventory } \\\text { Direct materials } & 24000 \text { units } & 24000 \text { units } \\\text { Work-in-process inventory } & 0 \text { units } & 0 \text { units } \\\text { Finished goods inventory } & 2000 \text { units } & 2500 \text { units }\end{array}$$

-On the 2018 budgeted income statement,what amount will be reported for cost of goods sold?

A)$150 000
B)$170 000
C)$152 600
D)$179 400

Question 73

After revenues are budgeted,the manufacturing manager prepares the ________ budget.

A)direct materials
B)direct labour
C)cost of goods sold
D)production

Question 74

Answer the following questions using the information below:
Pilbara Co Pty Ltd expects to sell 6000 ceramic vases for $20 each.Direct materials costs are $2,direct manufacturing labour is $10,and manufacturing overhead is $3 per vase.The following inventory levels apply to 2017:
$$\begin{array} { l r r } & \text { Beginning inventory } & \text { Ending inventory } \\\text { Direct materials } & 1000 \text { units } & 1000 \text { units } \\\text { Work-in-process inventory } & 0 \text { units } & 0 \text { units } \\\text { Finished goods inventory } & 400 \text { units } & 500 \text { units }\end{array}$$

-What are the 2018 budgeted costs for direct materials,direct manufacturing labour,and manufacturing overhead,respectively?

A)$12 200;$61 000;$18 300
B)$2000;$10 000;$3000
C)$2000;$0;$18 000
D)$12 000;$60 000;$18 000

Question 75

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

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

Question 76

Answer the following questions using the information below:
The following information pertains to the January operating budget for Brindabella Corporation,a retailer:
Budgeted sales are $300 000 for January
Collections of sales are 50% in the month of sale and 50% the next month
Cost of goods sold averages 70% of sales
Merchandise purchases total $250 000 in January
Marketing costs are $3000 each month
Distribution costs are $5000 each month
Administrative costs are $10 000 each month
For January,the amount budgeted for the non-manufacturing costs budget is:

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

Question 77

Wollondilly Company has budgeted sales volume of 33 000 units and budgeted production of 30 000 units,while 5000 units are in beginning finished goods inventory.How many units are targeted for ending finished goods inventory?

A)3000 units
B)8000 units
C)5000 units
D)2000 units

Question 78

Answer the following questions using the information below:
The following information pertains to the January operating budget for Brindabella Corporation,a retailer:
Budgeted sales are $300 000 for January
Collections of sales are 50% in the month of sale and 50% the next month
Cost of goods sold averages 70% of sales
Merchandise purchases total $250 000 in January
Marketing costs are $3000 each month
Distribution costs are $5000 each month
Administrative costs are $10 000 each month
For January,budgeted gross margin is:

A)$100 000.
B)$50 000.
C)$90 000.
D)$140 000.

Question 79

Maroochydore Corporation has budgeted sales of 20 000 units,target ending finished goods inventory of 3000 units,and beginning finished goods inventory of 2900 units.How many units should be produced next year?

A)21 900 units
B)20 100 units
C)18 000 units
D)15 900 units

Question 80

Answer the following questions using the information below:
Ku-ring-gai & Co expects to sell 25 000 pool cues for $12.00 each.Direct materials costs are $2.00,direct manufacturing labour is $4.00,and manufacturing overhead is $0.80 per pool cue.The following inventory levels apply to 2017:
$$\begin{array} { l r r } & \text { Beginning inventory } & \text { Ending inventory } \\\text { Direct materials } & 24000 \text { units } & 24000 \text { units } \\\text { Work-in-process inventory } & 0 \text { units } & 0 \text { units } \\\text { Finished goods inventory } & 2000 \text { units } & 2500 \text { units }\end{array}$$

-How many pool cues need to be produced in 2018?

A)19 500 cues
B)22 500 cues
C)25 500 cues
D)22 000 cues