Question 1

Current ratio is a measure of the liquidity of the company. It is derived as follows:

Accepted Answer

A)   current ratio = current assets/current liabilities
B)   current ratio = current liability/current assets
C)   current ratio = current inventory/current liabilities
D)   current ratio = current assets/current payables A

Question 2

A plan that calls for a series of actions to produce certain outcomes, with effective controls incorporated into these actions is a:

Accepted Answer

A)   budget
B)   forecast
C)   feasibility analysis
D)   corporate policy A

Question 3

Why is it important, especially in writing a variable budget, to differentiate fixed from variable costs?

Accepted Answer

Fixed costs should not change with volume levels, whereas variable costs change directly with volume. Differentiating fixed from variable costs is vital to accurate forecasting and budgeting based on different levels of volume. It is difficult due to the fact that many expenses are actually semivariable.

Question 4

What is return on investment (ROI)?

Accepted Answer

A)   net operating income divided by average operating assets
B)   gross operating income divided by average operating assets
C)   liability divided by average operating assets
D)   net operating income divided by inventory

Question 5

The budgeted balance sheet is usually not presented in one of the following formats:
• Account format: assets = liabilities plus owner's equity
• Report format: assets less liability = owner's equity

Accepted Answer

A) True 
 B)False

Question 6

Differentiate a forecast from a budget.

Accepted Answer

The answer of Differentiate a forecast from a budget....

Question 7

The controller is not responsible for establishing control mechanisms used by management to safeguard its resources and investments.

Accepted Answer

A) True 
 B)False

Question 8

Describe the treatment of labor in zero-based budgeting.

Accepted Answer

The answer of Describe the treatment of labor in zero-based...

Question 9

One example of an internal factor impacting the budget would be staff training costs to be incurred.

Accepted Answer

A) True 
 B)False

Question 10

A high balance of current assets over current liabilities may indicate that you are not investing excess cash wisely.

Accepted Answer

A) True 
 B)False

Question 11

What is a continuous or perpetual budget cycle?

Accepted Answer

A)   twelve-month budget
B)   one month (or quarter)  is added to the end of the budget as each month (or quarter)  comes to a close
C)   five-year budget
D)   fixed budget

Question 12

Why is zero-based budgeting used?

Accepted Answer

The answer of Why is zero-based budgeting used?...

Question 13

What is a capital budget?

Accepted Answer

The answer of What is a capital budget?...

Question 14

How does successful budgeting benefit the company?

Accepted Answer

The answer of How does successful budgeting benefit the company?...

Question 15

A business's past performance is guided by two sets of effects on your operations: those due to external business conditions-such as levels of tourism, natural disasters, terrorism, and local events-and those caused by internal management policies and procedures, such as system and product changes.

Accepted Answer

A) True 
 B)False

Question 16

The controller is responsible for establishing control mechanisms used by management to safeguard its resources and investments. Therefore, in that role you will also take the lead in developing the:

Accepted Answer

A)   sanitation plan
B)   employees schedule
C)   annual budget
D)   food recipe

Question 17

On a balance sheet, assets equal:

Accepted Answer

A)   owner's equity minus liabilities
B)   liabilities plus owner's equity
C)   liabilities
D)   owner's equity

Question 18

The type of budget that is simplest to construct and refers to one level of business activity is the:

Accepted Answer

A)   variable budget
B)   zero-based budget
C)   fixed budget
D)   cash-flow budget

Question 19

Fixed costs are fixed in dollars, and thus the fixed cost percentage decreases as sales increase.

Accepted Answer

A) True 
 B)False

Question 20

Describe the treatment of labor in variable budgeting.

Accepted Answer

The answer of Describe the treatment of labor in variable...

Exam 16: Budgeting and Manager ROI

Current ratio is a measure of the liquidity of the company. It is derived as follows:

A plan that calls for a series of actions to produce certain outcomes, with effective controls incorporated into these actions is a:

Why is it important, especially in writing a variable budget, to differentiate fixed from variable costs?

What is return on investment (ROI) ?

The budgeted balance sheet is usually not presented in one of the following formats: • Account format: assets = liabilities plus owner's equity • Report format: assets less liability = owner's equity

Differentiate a forecast from a budget.

The controller is not responsible for establishing control mechanisms used by management to safeguard its resources and investments.

Describe the treatment of labor in zero-based budgeting.

One example of an internal factor impacting the budget would be staff training costs to be incurred.

A high balance of current assets over current liabilities may indicate that you are not investing excess cash wisely.

What is a continuous or perpetual budget cycle?

Why is zero-based budgeting used?

What is a capital budget?

How does successful budgeting benefit the company?

A business's past performance is guided by two sets of effects on your operations: those due to external business conditions-such as levels of tourism, natural disasters, terrorism, and local events-and those caused by internal management policies and procedures, such as system and product changes.

The controller is responsible for establishing control mechanisms used by management to safeguard its resources and investments. Therefore, in that role you will also take the lead in developing the:

On a balance sheet, assets equal:

The type of budget that is simplest to construct and refers to one level of business activity is the:

Fixed costs are fixed in dollars, and thus the fixed cost percentage decreases as sales increase.

Describe the treatment of labor in variable budgeting.