Chapter 1 - The What And Why Of Budgeting
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1.
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Types of budgets may not include: 4-5
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  Master
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Operating
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Nonoperating
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Financial
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2.
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A budget is a financial plan to control future operations and express as dollars, units, hours, or manpower. 1
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Chapter 2 - Strategic Planning And Budgeting
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3.
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Long-term plans should not consider one of the following: 20
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New opportunities
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Competition
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Historical goals
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Financial strengths
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4.
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Budget accuracy ratios include: 28
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Actual sales/budget sales
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Actual cost/budget cost
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Actual profit/ budget profit
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All the above
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5.
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Employee performance may be measured by: 29
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Computing revenue per employee
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Man hours per employee
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Production volume to man-hours
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All the above
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6.
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Planning is based on long-term resources allotment and should never be linked to short-term and intermediate goals. T F 19
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Chapter 3 - Profit Planning: Targeting And Reaching Achievable Goals
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7.
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A profit plan may be stated in terms of: 43
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Target return on investment (e.g., 20% roi)
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Growth in earnings (e.g., 5%)
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Percentage of sales
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All of the above
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8.
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Profit plans should always be short-term and for less then a year such as quarterly or semi-annual. T F 32
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Chapter 4 - Administering The Budget: Reports, Analyses, And Evaluations
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9.
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The budget reports are not used for: 44
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Product costing
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Planning
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Control
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Information
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10.
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The budget sheet should not include: 49
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Cost formulas
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Charitable donation formulas
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Changes in operating conditions
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Foreseeable conditions
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11.
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The three major types of budget reports are for: planning control, and information. T F 44
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Chapter 5 - Cost Behavior: Emphasis On Flexible Budgeting And Contribution Margin
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12.
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An understanding of cost behavior is helpful to managers for: 53
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Flexible budgeting
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Contribution margin analysis
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Appraisal of divisional performance
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All the above
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13.
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Mixed factory overhead (mixed costs) do not include: 54
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Depreciation
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Supervision
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Clean up costs
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Maintenance and repairs
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14.
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The high-low method uses two extreme data points to determine the values of ; a (fixed cost portion) and b (variable rate) in the equation: 54
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X = b + c
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Y = a + bx
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B + c = x û y
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C = b (y + x)
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15.
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The Kramer Company developed a cost function for manufacturing overhead costs of Y = $14,000 + $5x. Estimated manufacturing overhead costs at 20,000 units of production would be 57
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$134,000
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$114,000
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$100,000
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$15,000
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16.
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The letter y in the standard regression equation of y = a + bx is best described as the: 54
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Dependent variable
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Constant
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Independent variable
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Coefficient of determination.
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17.
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In the standard regression equation of y = a + bx, the letter b is best described as the: 54
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Dependent variable
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Constant
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Slope
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Coefficient of determination.
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18.
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The letter a in the standard regression equation of y = a + bx is best described as the: 54
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Dependent variable
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Constant
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Slope
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Coefficient of determination.
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19.
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Mount Company incurred a total cost of $8,600 to produce 400 units of pulp Each unit of pulp required 5 direct labor hours to complete. What is the total fixed costs if the variable cost was $1.50 per direct labor-hour? 57
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$1,700
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$2,600
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$4,100
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$5,600
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Chapter 6 - Responsibility Accounting And Reporting To Management
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20.
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The cost systems of most companies fail when it comes to: 65
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Product cost
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Inventory pricing
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Cost control
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All the above
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21.
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Costs control themselves when left unchecked. T F 65
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Chapter 7 - Master Budget: Genesis Of Forecasting And Profit Planning
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22.
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Typical master budgets include all except: 76
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Sales budget
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Pro-rata budget
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Direct labor budget
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Cash receipts budget
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23.
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Selling and administrative expenses don not include: 85
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Salaries
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Factory utilities
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Commission on sales
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Bad debts
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24.
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Which one of the following statements is not true? 86
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No collections are made in the month of sales
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80% of the sales of any month are collected in the following month
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Collections are always made by outside agencies
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19% of sales are collected in the second following month
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25.
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A pro forma financial statement: 76
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Is a financial statement for past periods
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Is a projected or budgeted financial statement
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Is presented for the form but contains no dollar amounts
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None of the above
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26.
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The starting point in preparing a comprehensive budget for a manufacturing company limited by its ability to produce and not by its ability to sell is a(n): 81
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Sales forecast
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Estimate of productive capacity
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Estimate of cash receipts and disbursements
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Projection of fixed asset acquisitions.
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27.
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Jiggy company plans to sell 33,000 units during the month of May. The company plans to have 2,500 units on hand at the end of the month. If 1,200 units are on hand on May 1, how many units must be produced during May? 81
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28.
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A budget is a projected or planned income statement. T F 76
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Chapter 8 - Using Variance Analysis To Evaluate Performance
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29.
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Variance analysis is a tool used to: 92
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Evaluate financial performance
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Evaluate customer satisfaction
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Determine cost ratios
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Identify and control product compatibility
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30.
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Reasons for unfavorable materials variances do not include: 97
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Total quality management (TQM)
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Overstated prices
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Failure to detect defective goods
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Inefficient labor or poor supervision
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31.
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Price variances focus on the difference between 96
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Actual price and standard price for actual quantity allowed for units actually produced
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Actual price and standard price for standard quantity allowed for units actually produced
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Actual price and standard price for actual quantity allowed for estimated activity
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None of the above
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32.
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Variance analysis can spotlight positive performance and can be used to reward superior performance by employees. T F 92
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Chapter 9 - Budgeting Sales And Sales Forecasts
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33.
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The starting point of the master budget is always the: 113
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Cash receipts budget
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Production budget
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Sales budget
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None of the above
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34.
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The personnel department requires a number of forecasts in planning for human resource which may include trends in: 114
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Labor turnover
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Retirement age
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Absenteeism
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All the above
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35.
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Sales forecasts are crude estimates and should never be used for budgets, profit planning, or capital expenditure analysis. T F 113
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Chapter 10 - Budgeting Manufacturing Costs
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36.
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Manufacturing costs are associated with: 117
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Direct materials
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Direct labor
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Factory overhead
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All the above
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37.
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A static budget is geared toward: 133
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Only one level of activity
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Many independent levels of activity
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Only interrelated levels of activity
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None of the above
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38.
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Basic steps in preparing a flexible budget do not include: 134
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Determine levels of activities
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Determine the relevant range activity is expected to fluctuate
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Analyze costs incurred over the relevant range
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Separate costs by behavior
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Chapter 11 - Budgeting For Sales, Advertisinbg, And Distribution Expenses
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39.
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Advertising and promotion expense budgets can include: 144
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Internet advertising
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Television advertising
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Magazine advertising
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All the above
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40.
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Measures of advertising do not include: 145
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Trends in advertising cost to sales
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Advertising by alleged incurred costs
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Advertising cost per unit sold
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Advertising cost per sales dollars
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41.
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A budget for automobile expenses may be based on 138
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Size
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Sales
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Mileage
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Machine hours
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42.
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An advertising budget may be developed based on 144
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Percentage of sales or profit
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Unit sales
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Objective task
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All of the above
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43.
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The marketing budget should never depend on the type of product, service, competition or market share but on what the market will bear. T F 138
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Chapter 12 - Budgeting General And Administrative Expenses
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44.
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In budgeting salaries there should be included a provision for salary increases, sick leave time, vacations, holidays and fringe benefits. T F 151
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45.
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Depreciation on the office equipment would appear in which of the following budgets? 152
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Cash budget
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Production budget
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Selling expenses budget
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General and administrative expenses budget
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Chapter 13 - Budgeting Research And Development
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46.
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The direct and indirect costs associated with R & D do not include: 158
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Personnel costs
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Personal costs
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Depreciation on r & d
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Rentals and travel
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47.
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The R & D budget may be based on all except: 159
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A percentage of creative activity
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Estimated costs of specific projects
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A percentage of profit
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A percentage of operating income
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48.
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The manager should not keep track of the following with respect to R & D: 162
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R & D to net sales
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R & D by product
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Non-productive incentives
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Estimated project costs
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49.
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Research and development (R & D) should never be justified on the return obtained or incurred and risks assumed but on the possible potential. T F 158
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Chapter 14 - Cash Flow Forecasting And Cash Budgeting
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50.
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A forecast of cash collections and potential write-offs of accounts receivable is essential in: 165
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Sales budgeting
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Production budgeting
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Cash budgeting
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All the above
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51.
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Nonoperating components of a cash budget do not include: 168
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Royalties
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Collections form customers
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Rents
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Loan proceeds
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52.
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Which of the following appears in the cash budget? 168
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Interest payments
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Purchase of equipment on credit
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Depreciation
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All of the above
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Chapter 15 - Use Of A Spreadsheet Program And Software For Budgeting
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53.
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Budgeting packages include: 174-175
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Comshare Budget Plus
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Encore Plus
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Budget Maestro
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All the above
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54.
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The latest generation of budgeting and planning (b&p) software, often known as active financial planning software, are characterized by: 176
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Budgeting
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Forecasting analytics
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Business intelligence
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All of the above
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55.
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Which of the following represents the best reason for “what-if” (sensitivity) analysis when preparing master budgets? 172
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Reconcile long-term estimates with short-term realities
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Recognize uncertainty surrounding projections
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Lend credibility to estimated values
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Detect erroneous projections
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Chapter 16 - Budgeting Capital Expenditures
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56.
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Factors to consider in determining capital expenditure do not include: 180-181
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Short-term interest rates
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Rate of return
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Budget ceiling
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Tax rates
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57.
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Capital expenditure policy should not take into account: 181-182
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Desired rate of return
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Cost impact
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Asset life
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Timing
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58.
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Capital expenditures do not include replacing machinery to economize on costs. T F 178
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Chapter 17 - Zero-Base Budgeting: Priority Budgeting For Best Resource Allocation
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59.
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Zero-base budgeting (ZBB) system includes all except: 192
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Starts with base zero
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Examines cost/benefit for all activities
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Starts with dollars
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Starts with purposes and activities
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60.
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A decision package will not contain: 194
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Description of activities and reason to carry it out
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Statement of objectives and benefits to be derived
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The priorities established
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A flexible (dynamic) input
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61.
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Program budgeting includes: 197
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Planning
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Programming
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Budgeting
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All the above
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62.
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Zero Based budgeting requires managers to: 191
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Justify expenditures that are increases over the prior period's budgeted amount
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Justify all expenditures, not just increases over last year's amount
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Maintain a full-year budget intact at all times
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Maintain a budget with zero increases over the prior period
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63.
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Zero base budgeting (ZBB) is a priority form of budgeting ranking activities such as products and services. T F 191
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64.
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An objective of zero-based budgeting is to base the current year's budget on the expenditures of the previous year 191
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65.
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The major feature of zero-based budgeting (ZBB) is that it questions each activity and determines whether it should be maintained as it is, reduced, or eliminated. T/F 191
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Chapter 18 - Budgeting For Service Organizations
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66.
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Which one of the following statements is not true? 199
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Planning and control are critical functions in service business
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The practice of budgeting is probably not as well developed in service companies as it is in manufacturing firms.
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In manufacturing businesses, budgeting is forced upon the business by the need to keep sales and pro¡duction coordinated.
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In service companies, the business activity rarely requires human effort.
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67.
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Service industries can include all except: 201
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Airlines
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Shipbuilding
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Hotels
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Training centers
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68.
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Which of the following budgets are identical in a service firm? 204
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The cash receipts budget and the cash payments budget
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The production budget and the materials purchases budget
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The sales budget and the production budget
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The materials purchases budget and the cash payments budget
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69.
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Planning and control are critical functions in all business, whether they produce and sell goods or provide services. T F 199
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Chapter 19 - Budgeting For Nonprofit Organizations
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70.
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Government funds do not include: 208
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General fund
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Slush fund
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Special assessment fund
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Capital projects fund
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71.
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Interfund transactions that are not loans or advances, reimbursements, or quasi-external transactions are classified as: 211
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Transfers of tax revenue from a special revenue fund
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Transfer of bonds
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Transfer of assets
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Transfer of services
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72.
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Which of the following organizations would be most likely to use budgets to authorize expenditure of funds? 210
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Service organizations
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Retail merchants
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Governmental organizations
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Organizations seeking to enhance internal control
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73.
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Nonprofit organizations include voluntary support organizations, governments and state schools, and community-based organizations. T F 206
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74.
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Gold County received goods that had been approved for purchase but for which payment had not yet been made. Should the accounts listed below be decreased? 211
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Encumbrances - No Expenditures - No
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Encumbrances - No Expenditures - Yes
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Encumbrances - Yes Expenditures - No
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Encumbrances - Yes Expenditures - Yes
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75.
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The estimated revenues control account of a governmental unit is credited when 211
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Actual revenues are recorded.
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Actual revenues are collected.
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The budget (appropriation) is recorded.
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The budget is closed at the end of the year.
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