Deck 23: Incremental Analysis

Question 1

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.

Answer 1

True

Question 2

A budget can be used as a basis for evaluating performance.

Answer 2

True

Question 3

The longer the budget period, the more reliable the estimates of future outcomes.

Answer 3

False

Question 4

A budget can facilitate the coordination of activities among the segments of a large company.

Question 5

A well-developed budget can operate and enforce itself.

Question 6

Budgets can have a positive or negative effect on human behavior depending on the manner in which the budget is developed and administered.

Question 7

The budget committee has the responsibility for coordinating the preparation of the budget.

Question 8

The master budget consists of operating and financial budgets.

Question 9

The budget itself and the administration of the budget are the responsibility of the accounting department.

Question 10

The number of direct labor hours needed for production is obtained from the production budget.

Question 11

The flow of input data for budgeting should be from the highest levels of responsibility to the lowest.

Question 12

The budget is developed within the framework of a sales forecast.

Question 13

The master budget reflects management's long-term plans encompassing five years or more.

Question 14

Financial budgets must be completed before the operating budgets can be prepared.

Question 15

Budgets are statements of management's plans stated in financial terms.

Question 16

A benefit of budgeting is that it provides definite objectives for evaluating performance.

Question 17

Budgeting and long-range planning are two terms that describe the same process.

Question 18

A budget can be a means of communicating a company's objectives to external parties.

Question 19

Effective budgeting requires clearly defined lines of authority and responsibility.

Question 20

The direct materials budget must be completed before the production budget because the quantity of materials available for production must be known.

Question 21

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.

Question 22

In order to develop a budgeted balance sheet, the previous year's balance sheet is needed.

Question 23

The budgeted balance sheet is prepared entirely from the budgets for the current year.

Question 24

The direct materials budget contains both quantity and cost data.

Question 25

In service enterprises, the critical factor in budgeting is coordinating materials and equipment with anticipated services.

Question 26

The manufacturing overhead budget generally has separate sections for variable, mixed, and fixed costs.

Question 27

If a monthly cash budget is prepared properly, there will never be a cash deficiency at the end of any month.

Question 28

Financial planning models and statistical and mathematical techniques may be used in forecasting sales.

Question 29

A production budget should be prepared before the sales budget.

Question 30

The budget itself and the administration of the budget are entirely accounting responsibilities.

Question 31

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.

Question 32

A merchandiser has a merchandise purchases budget rather than a production budget.

Question 33

The budgeted income statement indicates the expected profitability of operations for the next year.

Question 34

The starting point when budgeting for a not-for-profit organization is generally to budget expenditures first.

Question 35

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.

Question 36

A critical factor in budgeting for a service firm is to determine the amount of products to purchase.

Question 37

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.

Question 38

A manufacturing overhead budget is not needed if the company develops a predeter-mined overhead rate to apply overhead.

Question 39

The manufacturing overhead budget shows the expected manufacturing overhead costs.

Question 40

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.

Question 41

The budget committee would not normally include the

A) research director.
B) treasurer.
C) sales manager.
D) external auditor.

Question 42

Budgeting is usually most closely associated with which management function?

A) Planning
B) Directing
C) Motivating
D) Controlling

Question 43

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.

Question 44

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.

Question 45

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.

Question 46

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.

Question 47

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.

Question 48

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.

Question 49

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.

Question 50

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.

Question 51

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.

Question 52

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.

Question 53

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.

Question 54

It is important that budgets be accepted by

A) division managers.
B) department heads.
C) supervisors.
D) all of these.

Question 55

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

Question 56

The most common budget period is

A) one month.
B) three months.
C) six months.
D) one year.

Question 57

The budget committee in a company is often headed by the

A) president.
B) controller.
C) treasurer.
D) budget director.

Question 58

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.

Question 59

Long-range planning usually encompasses a period of at least

A) six months.
B) 1 year.
C) 5 years.
D) 10 years.

Question 60

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.

Question 61

Which of the following is not an operating budget?

A) Direct labor budget
B) Sales budget
C) Production budget
D) Cash budget

Question 62

In a production budget, total required units are the budgeted sales units plus

A) beginning finished goods units.
B) desired ending finished goods units.
C) desired ending finished goods units plus beginning finished goods units.
D) desired ending finished goods units minus beginning finished goods units.

Question 63

An overly optimistic sales budget may result in

A) increases in selling prices late in the year.
B) insufficient inventories.
C) increased sales during the year.
D) excessive inventories.

Question 64

The total direct labor hours required in preparing a direct labor budget are calculated using the

A) sales forecast.
B) production budget.
C) direct materials budget.
D) sales budget.

Question 65

Which is the last step in developing the master budget?

A) Preparing the budgeted balance sheet
B) Preparing the cost of goods manufactured budget
C) Preparing the budgeted income statement
D) Preparing the cash budget

Question 66

The financial budgets include the

A) cash budget and the selling and administrative expense budget.
B) cash budget and the budgeted balance sheet.
C) budgeted balance sheet and the budgeted income statement.
D) cash budget and the production budget.

Question 67

The following information is taken from the production budget for the first quarter: How many finished goods units should be produced during the quarter if the company desires 2,400 units available to start the next quarter?

A) 343,500
B) 340,500
C) 355,500
D) 344,400

Question 68

The culmination of preparing operating budgets is the

A) budgeted balance sheet.
B) production budget.
C) cash budget.
D) budgeted income statement.

Question 69

The direct materials budget details
1) the quantity of direct materials to be purchased.
2) the cost of direct materials to be purchased.

A) 1
B) 2
C) both 1 and 2
D) neither 1 nor 2

Question 70

The production budget shows expected unit sales are 50,000. The required production units are 52,000. What are the beginning and desired ending finished goods units, respectively?

Question 71

The direct materials budget shows: What are the direct materials per unit?

A) .44 pounds
B) 4.0 pounds
C) 4.4 pounds
D) Cannot be determined from the data provided.

Question 72

Which of the following is done to improve the reliability of the sales forecast?

A) Employ financial planning models
B) Lengthen the planning horizon to more than a year
C) Rely solely on outside consultants
D) Use the sales forecasts from the previous year

Question 73

Which of the following is not a proper match-up?

A) Long range planning $\harr$ Strategies
B) Budgeting $\harr$ Short-term goals
C) Long-range planning $\harr$ 5 years
D) Budgeting $\harr$ Long-term goals

Question 74

The direct materials budget shows: The total direct materials needed for production is

A) 18,000 pounds.
B) 6,600 pounds.
C) 11,400 pounds.
D) 101,400 pounds.

Question 75

The production budget shows expected unit sales of 32,000. Beginning finished goods units are 5,600. Required production units are 33,600. What are the desired ending finished goods units?

A) 4,000
B) 5,600
C) 6,400
D) 7,200

Question 76

Which of the following is not a financial budget?

A) Capital expenditure budget
B) Cash budget
C) Manufacturing overhead budget
D) Budgeted balance sheet

Question 77

The production budget shows that expected unit sales are 40,000. The total required units are 45,000. What are the required production units?

A) 5,000
B) 7,500
C) 10,000
D) Cannot be determined from the data provided.

Question 78

If there were 70,000 pounds of raw materials on hand on January 1, 140,000 pounds are desired for inventory at January 31, and 420,000 pounds are required for January production, how many pounds of raw materials should be purchased in January?

A) 350,000 pounds
B) 560,000 pounds
C) 280,000 pounds
D) 490,000 pounds

Question 79

A sales forecast

A) shows a forecast for the firm only.
B) shows a forecast for the industry only.
C) shows forecasts for the industry and for the firm.
D) plays a minor role in the development of the master budget.

Question 80

The direct materials and direct labor budgets provide information for preparing the

A) sales budget.
B) production budget.
C) manufacturing overhead budget.
D) cash budget.