Question 1

When upper-level management prepares a budget with consultations from managers and employees, the firm has a
A) Participative budget
B) Zero-based budget
C) Flexible budget
D) Activity-based budget

Accepted Answer

A participative budget involves input from managers and employees, allowing for a more inclusive and collaborative budgeting process.

Question 2

Kaizen budgets
A) Are the same as traditional budgets
B) Include cost reduction and quality improvements in the budgeting process
C) Are prepared month by month
D) Do not include revenues

Accepted Answer

Kaizen budgets differ from traditional budgets because they include cost reduction and quality improvements as an integral part of the budgeting process. They are also prepared month by month to allow for continuous improvement. While Kaizen budgets do not necessarily focus on revenues, they do take into account the potential impact of cost reductions and quality improvements on overall financial performance.

Question 3

Which of the following phrases should not be associated with participative budgeting?
A) Activity-based budgeting
B) Bottom-up
C) Budgetary slack
D) Top-down

Accepted Answer

The answer of Which of the following phrases should not...

Question 4

The manufacturing overhead budget I. Compares revenue to overhead
II. Forecasts overhead costs per unit for cost of goods sold calculations
III. Forecasts total overhead costs
A) I and III only
B) I and II only
C) I, II, and III
D) II and III only

Accepted Answer

The manufacturing overhead budget primarily forecasts total overhead costs and allocates these costs per unit for accurate cost of goods sold calculations. It does not compare revenue to overhead; that's more the function of other financial statements like the income statement.

Question 5

Rolling budgets I. Are often prepared monthly or quarterly
II. Reflect any changes going forward through a specified future period (usually annually or longer)
III. Provide managers with more current budget targets than traditional budgets
A) I and II only
B) I and III only
C) I, II, and III
D) II and III only

Accepted Answer

Rolling budgets are prepared on a frequent basis (monthly or quarterly), updated to reflect changes for a future period, and offer more current targets, incorporating all aspects mentioned.

Question 6

Flexible budgets reflect I. Operations for actual costs and revenues
II. Operations for costs and revenues for the volume of sales from the master budget
III. Operations for actual volume of sales with budgeted variable costs per unit and budgeted total fixed costs
A) I only
B) II only
C) III only
D) II and III only

Accepted Answer

Flexible budgets are designed to adjust for the actual volume of sales, applying budgeted variable costs per unit and budgeted total fixed costs, making option III correct.

Question 7

The difference between a static budget and a flexible budget is that

Accepted Answer

The answer of The difference between a static budget and...

Question 8

The budgeted income statement I. Accumulates information from the supporting budgets
II. Is based only on last year's income statement
III. Is prepared a few weeks before the actual income statement is prepared for the period
A) I only
B) I and III only
C) II only
D) II and III only

Accepted Answer

The answer of The budgeted income statement I. Accumulates information...

Question 9

The cost of goods sold budget
A) Includes beginning inventories
B) Combines manufacturing overhead and support costs into one category
C) Includes revenues
D) Includes cash disbursements

Accepted Answer

The cost of goods sold budget includes the cost of goods sold, which is calculated by subtracting the beginning inventory from the total cost of goods available for sale. Therefore, it includes beginning inventories.

Question 10

Use the following information for the next 2 questions.
Bynsel, Inc., a retailer, projects the following purchases and sales of its product for the next 4 months:  Each unit costs $100, and all purchases are on account. Two-thirds of purchases are paid in the month of the purchase and one-third are paid in the month following the purchase. Bynsel gets a 3% discount whenever it pays in the month of the purchase. The selling price per unit is $200. Sales are 60% cash and 40% on customer credit cards. The bank charges Bynsel a 5% fee for each credit card transaction and transfers the funds to Bynsel's checking account on the same day as the credit card sale.
-What are cash disbursements for the third month?
A) $36,367
B) $23,033
C) $33,333
D) $32,733

Accepted Answer

The answer of Use the following information for the next...

Question 11

Business strategy is incorporated in budgets through I. Proposed changes in product emphasis
II. Revenue forecasts for new products
III. Proposed changes in discretionary expenses such as research and development
A) I and II only
B) I and III only
C) I, II, and III
D) II and III only

Accepted Answer

Business strategy involves making decisions that will help the business achieve its long-term goals. Budgets are used to allocate resources and determine financial targets for the coming year, and as such, it's important to incorporate the business strategy into the budget planning process.

Proposed changes in product emphasis, revenue forecasts for new products and proposed changes in discretionary expenses such as research and development can be essential aspects of business strategy.

Therefore, incorporating all of these elements into the budgeting process (I, II, and III) can help ensure that the budget aligns with the strategic goals of the business.

Question 12

Use the following information for the next 2 questions.
Bynsel, Inc., a retailer, projects the following purchases and sales of its product for the next 4 months:  Each unit costs $100, and all purchases are on account. Two-thirds of purchases are paid in the month of the purchase and one-third are paid in the month following the purchase. Bynsel gets a 3% discount whenever it pays in the month of the purchase. The selling price per unit is $200. Sales are 60% cash and 40% on customer credit cards. The bank charges Bynsel a 5% fee for each credit card transaction and transfers the funds to Bynsel's checking account on the same day as the credit card sale.
-What are cash receipts for the third month?
A) $78,400
B) $58,800
C) $124,000
D) $76,000

Accepted Answer

The cash receipts for the third month are $78,400. This is based on the assumption that the correct calculation or data provided leads to this figure.

Question 13

Activity based budgeting
A) Is the same as traditional budgeting
B) Separates cost into fixed and variable categories
C) Uses more cost pools and cost drivers to determine forecasted costs
D) Is similar to zero-based budgeting

Accepted Answer

Activity based budgeting uses more cost pools and cost drivers to determine forecasted costs, unlike traditional budgeting which only separates cost into fixed and variable categories. It is not the same as zero-based budgeting.

Question 14

Budgets are used to I. Forecast future performance
II. Compare to actual operations
III. Communicate an organization's strategy and targets
A) I only
B) II only
C) I and III only
D) I, II, and III

Accepted Answer

Budgets can be used for all three purposes mentioned in the options. They help in forecasting future performance, comparing to actual operations, and communicating an organization's strategy and targets. Therefore, option D, I, II, and III are all correct.

Question 15

Expected ending inventory volumes and costs need to be calculated to forecast
A) Beginning inventory levels for the budget period
B) Cost of goods sold
C) Revenues
D) Overhead costs

Accepted Answer

Expected ending inventory volumes and costs are primarily used to forecast the cost of goods sold (COGS). COGS is directly affected by inventory levels, as it represents the cost of the inventory that was sold during the period. Calculating expected ending inventory helps in estimating COGS by determining the value of inventory that remains unsold.

Question 16

The direct manufacturing labor budget I. Is stated in direct labor hours and cost
II. Is only stated in direct labor cost
III. Includes hours and costs of supervisors
A) I only
B) II only
C) III only
D) I and III only

Accepted Answer

The direct manufacturing labor budget is stated in terms of both direct labor hours and costs, but it does not include the hours and costs of supervisors.

Question 17

Participative budgeting I. Occurs from the bottom up
II. Motivates employees to buy into the budgeting process
III. Provides managers with incentives to build in budgetary slack
A) I only
B) I and II only
C) I, II, and III
D) II only

Accepted Answer

Participative budgeting indeed occurs from the bottom up, as it involves employees at various levels in the budget-making process. It motivates employees by giving them a sense of ownership over the budget, thereby increasing their commitment to meeting budgetary goals. However, it also provides managers with an opportunity to build in budgetary slack, as they may overestimate expenses or underestimate revenues to create a buffer that makes it easier to achieve budget targets.

Question 18

Budget assumptions are gathered from I. Last year's budgets
II. Department heads with information about next year's plans
III. Future expectations
A) I only
B) I and II only
C) I, II, and III
D) II only

Accepted Answer

Budget assumptions are gathered from last year's budgets, department heads with information about next year's plans, and future expectations to ensure a comprehensive and informed budgeting process.

Question 19

Which of the following phrases should not be associated with kaizen budgeting?
A) Participative budgeting
B) Activity-based budgeting
C) Flexible budgeting
D) Budgetary slack

Accepted Answer

Kaizen budgeting focuses on continuous improvement and efficiency, whereas budgetary slack involves padding the budget to make targets easier to achieve, which contradicts the principles of kaizen.

Question 20

The revenues budget
A) Estimates overhead costs
B) Matches revenues and expenses
C) Provides estimated selling prices, volumes, and total revenues
D) Only estimates the volume of units sold

Accepted Answer

The revenue budget provides estimated selling prices, volumes, and total revenues.

Quiz 10: Static and Flexible Budgets

When upper-level management prepares a budget with consultations from managers and employees, the firm has a

Kaizen budgets

Which of the following phrases should not be associated with participative budgeting?

The manufacturing overhead budget I. Compares revenue to overhead II. Forecasts overhead costs per unit for cost of goods sold calculations III. Forecasts total overhead costs

Rolling budgets I. Are often prepared monthly or quarterly II. Reflect any changes going forward through a specified future period (usually annually or longer) III. Provide managers with more current budget targets than traditional budgets

Flexible budgets reflect I. Operations for actual costs and revenues II. Operations for costs and revenues for the volume of sales from the master budget III. Operations for actual volume of sales with budgeted variable costs per unit and budgeted total fixed costs

The difference between a static budget and a flexible budget is that

The budgeted income statement I. Accumulates information from the supporting budgets II. Is based only on last year's income statement III. Is prepared a few weeks before the actual income statement is prepared for the period

The cost of goods sold budget

Business strategy is incorporated in budgets through I. Proposed changes in product emphasis II. Revenue forecasts for new products III. Proposed changes in discretionary expenses such as research and development

Activity based budgeting

Budgets are used to I. Forecast future performance II. Compare to actual operations III. Communicate an organization's strategy and targets

Expected ending inventory volumes and costs need to be calculated to forecast

The direct manufacturing labor budget I. Is stated in direct labor hours and cost II. Is only stated in direct labor cost III. Includes hours and costs of supervisors

Participative budgeting I. Occurs from the bottom up II. Motivates employees to buy into the budgeting process III. Provides managers with incentives to build in budgetary slack

Budget assumptions are gathered from I. Last year's budgets II. Department heads with information about next year's plans III. Future expectations

Which of the following phrases should not be associated with kaizen budgeting?

The revenues budget