Deck 5: Planning and Forecasting

Question 1

Budgeting will be ineffective unless it is tied to strategy and used to manage an organization's overall performance.

Answer 1

True

Question 2

In a bottom-up budget approach,at each higher level of management,the budget is reviewed and may be altered to satisfy the competing needs of various

Answer 2

True

Question 3

Deviations from the budget can occur because of good decisions,bad decisions,or events.

Answer 3

True

Question 4

Budgets assist managers in the areas of planning,controlling,evaluating,and decision making.

Question 5

Ideal standards represent a level of performance that can be attained with reasonable effort.

Question 6

Bottom-up budgeting is also referred to as a participative budgeting.

Question 7

Standard setting is not an exact science,but there are some hard and fast criterion for proving one standard right and the other one wrong.

Question 8

Practical standards represent a level of performance that can be attained with reasonable effort.

Question 9

Both the top-down and bottom-up approaches to budgeting are linear,with budget information flowing in a single direction.

Question 10

A bottom-up approach to budgeting is circular while a top-down approach is linear.

Question 11

A budget is an operating plan that may be expressed in either financial or non-financial terms.

Question 12

If practical standards are used,the standard quantity for direct materials should not include allowances for waste and spoilage in the normal course of manufacturing.

Question 13

Zero-based budgeting is not as time consuming as incremental budgeting.

Question 14

Budgetary slack is more common in a top-down approach to budgeting than in a bottom-up approach.

Question 15

Top-down budgeting is also referred to as participative budgeting.

Question 16

Since the purchasing agent is responsible for ordering raw materials,he or she would be the one to negotiate a volume discount.

Question 17

A rolling budget always includes 12 months of data and as one month ends,it is removed from the budget and the entire budget rolls forward one month.

Question 18

The most popular way to begin the budgeting process is the incremental approach.

Question 19

Standard direct labor prices are also referred to as direct labor rates.

Question 20

The terms standard price and standard cost can be used interchangeably.

Question 21

The first section of the cash budget reconciles the cash available to the borrowing required to meet the minimum cash balance.

Question 22

The first component of the master budget is the cash budget.

Question 23

A bottom-up budget approach is also referred to as

A)participative budgeting.
B)imposed budgeting.
C)responsibility budgeting.
D)none of these answer choices are correct.

Question 24

Budgets assist managers which of the following aspects of management?

A)Planning
B)Controlling
C)Evaluating
D)All of these answer choices are correct.

Question 25

The master budget is a collection of smaller budgets that lead to pro-forma financial statements.

Question 26

Which of the following budget approaches will produce a more accurate budget?

A)Participative budgeting.
B)Imposed budgeting.
C)Responsibility budgeting.
D)None of these answer choices are correct.

Question 27

Budgets assist managers in all the following aspects of management except

A)planning.
B)controlling.
C)leading.
D)evaluating.

Question 28

The formula for the production budget is Budgeted Sales + Budgeted Beginning Inventory - Budgeted Ending Inventory = Budgeted Production.

Question 29

Which of the following is not a characteristic of a bottom-up budget environment?

A)Executive management creates the budget.
B)At each higher level of management,the budget is reviewed and may be altered.
C)The budget approach may also be referred to as participative budgeting.
D)All of these answer choices are characteristics of a bottom-up budget environment.

Question 30

The key inputs for the direct materials purchases budget are the production budget and the direct materials standards for each project.

Question 31

Which of the following is not a characteristic of a top-down budget environment?

A)Executive management creates the budget.
B)This approach is referred to as participative budgeting.
C)The budget is pushed down through the organization.
D)All of these answer choices are characteristics of a top-down budget environment.

Question 32

The predetermined overhead rate is calculated as Budgeted Total Manufacturing Overhead divided by Budgeted Activity Level of Application Base.

Question 33

Preparing a budget allows managers to

A)plan for the future.
B)reduce the need for knee-jerk responses to unexpected situations.
C)assess whether a division's strategic direction is in line with corporate strategy.
D)All of these answer choices are correct.

Question 34

Since the cash budget drives all other components of the master budget,it is imperative that it be as realistic as possible.

Question 35

Preparing a budget does not allow managers to

A)eliminate any variances that would have been created without a budget.
B)help divisions within the organization to communicate with one another.
C)assess whether a division's strategic direction is in line with corporate strategy.
D)All of these answer choices are things which preparing a budget allows managers to do.

Question 36

The direct labor quantity standard is the number of products that can be produced in one hour.

Question 37

The final component of the operating budget is the ending inventory and cost of goods sold budget.

Question 38

To prepare the sales budget,multiply the forecasted sales

Question 39

A top-down budget approach is also referred to as

A)participative budgeting.
B)imposed budgeting.
C)responsibility budgeting.
D)None of these answer choices are correct.

Question 40

Pro-forma financial statements are prepared based on assumed rather than actual results.

Question 41

Which of the following is not a characteristic of zero-based budgeting?

A)This method of budgeting is often used in governmental entities.
B)This method of budgeting is much more time-consuming than incremental budgeting.
C)This method of budgeting encourages budgetary slack.
D)All of these answer choices are characteristics of zero-based budgeting.

Question 42

Sara Speed requested $120,000 in her budget to cover salary expenses.However,Sara realistically expects to spend $110,000 on salaries.This is an example of

A)top-down budgeting.
B)operating income padding.
C)rolling budgeting.
D)budgetary slack.

Question 43

Which of the following budget approaches begins each year at $0 and each individual budget item must be justified?

A)Dollar value based budgeting
B)Governmental-based budgeting
C)Justification-based budgeting
D)Zero-based budgeting

Question 44

Which of the following is not a characteristic of a participative budget?

A)It will produce a more accurate budget than an imposed budget.
B)It tends to elicit more commitment to the budget than a top-down budget.
C)It is the most efficient method of budget preparation.
D)It is a time consuming process as many people must provide input.

Question 45

Budgetary slack is also referred to as

A)budgetary padding.
B)bottom-up slack.
C)top-down slack.
D)None of these answer choices are correct.

Question 46

An ideal standard signifies

A)perfection.
B)realistic projections.
C)attainable goals.
D)All of these answer choices are correct.

Question 47

Which of the following is not a characteristic of a rolling budget?

A)This method of budgeting always includes 12 months of data.
B)As one month ends,it is removed from the budget and the entire budget rolls forward one month.
C)At the beginning of the budget period,management breaks down only the first quarter into months.
D)All of these answer choices are characteristics of a rolling budget.

Question 48

Which of the following is not a criticism of ideal standards?

A)After a period of performing below standard,employees will likely lose motivation.
B)Morale will suffer because employees cannot attain the standard.
C)In an effort to meet an ideal efficiency standard,employees may take shortcuts.
D)All of these answer choices are criticisms of ideal standards.

Question 49

Deviations from the budget may occur because of

A)bad decisions.
B)events beyond the company's control.
C)good decisions.
D)All of these answer choices are correct.

Question 50

A manager estimates that revenues for the coming period will be $85,000 but includes only $80,000 in her budget.This is an example of

A)pro-forma variance.
B)revenue slack.
C)budgetary padding.
D)None of these answer choices are correct.

Question 51

Which of the following is an advantage of ideal standards?

A)Employees will be motivated.
B)Employees will take pride in their work.
C)Employee morale will be high.
D)None of these choices are advantages of ideal standards.

Question 52

In a manufacturing setting,practical standards do not allow for

A)machine breakdowns.
B)employee fatigue.
C)vacations.
D)excess employee idleness.

Question 53

An imposed budget

A)tends to elicit more commitment to the budget from employees since they have had some input into its creation.
B)begins at the lowest levels of management and filters up through the organization.
C)is the least efficient method of budget preparation.
D)involves the fewest number of people in the budgeting process.

Question 54

Which of the following is not a criticism of ideal standards?

A)Product quality may decline if standards are not met.
B)Employee morale will suffer if standards are not met.
C)Employees may take shortcuts in order to meet the standards.
D)All of these answer choices are criticisms of ideal standards.

Question 55

Under both participative budgeting and imposed budgeting,the process is

A)linear.
B)iterative.
C)curvilinear.
D)None of these answer choices are correct.

Question 56

Which of the following is not a consequence of budgetary slack?

A)Resources may not be allocated in the optimal way.
B)Those who implement the budget may engage in undesirable behavior because they did have input into setting the budget.
C)Managers may receive bonuses they would not have earned if the budget had been prepared realistically.
D)All of these answer choices are consequences of budgetary slack.

Question 57

Which of the following is a disadvantage of participative budgeting?

A)It is a time-consuming process.
B)Managers may pad the budget.
C)Both it is a time-consuming process and managers may pad the budget.
D)Neither that it is a time-consuming process nor that managers may pad the budget.

Question 58

Which of the following is not a behavioral issue related to a top-down budgeting environment?

A)Employees may feel that an imposed budget is unfair.
B)Employees will have no motivation to attempt to meet the budget.
C)Employees may engage in budgetary padding.
D)The organization's resources may be wasted.

Question 59

Which of the following is the most popular way to begin the budgeting process?

A)The incremental approach
B)Zero-based approach
C)Rolling approach
D)None of these answer choices are correct.

Question 60

Undesirable behavior is especially common in a bottom-up budget environment because

A)managers may be required to explain unfavorable outcomes whether or not they are in control of the factors that caused the outcomes.
B)managers have the ability to include budgetary slack to increase his or her chances of beating the budget.
C)managers may be required to explain unfavorable outcomes whether or not they are in control of the factors that caused the outcomes and managers have the ability to include budgetary slack to increase their changes of beating the budget.
D)managers may not be required to explain unfavorable outcomes whether or not they are in control of the factors that caused the outcomes and managers may not have the ability to include budgetary slack to increase their chances of beating the budget.

Question 61

The standard price of direct labor includes all of the following except

A)payroll taxes.
B)health insurance.
C)retirement contributions.
D)employee-paid union dues.

Question 62

ABC Corporation allocates overhead based on direct labor cost.Assume ABC expects to incur a total of $1,025,000 in overhead costs and $820,000 in direct labor costs.Actual overhead costs incurred totaled $1,050,000 and actual direct labor costs totaled $800,100.ABC's predetermined overhead rate is nearest

A)125% of direct labor cost.
B)128% of direct labor cost.
C)98% of direct labor costs.
D)100% of direct labor costs.

Question 63

The difference in standard price and standard cost of direct material is that

A)standard price is the amount to produce one unit of product; standard cost is the amount paid to obtain one unit of material from a vendor.
B)standard price is the amount paid to obtain one unit of material from a vendor; standard cost is the amount to produce one unit of product.
C)standard price is the amount added to work in process as material is put into production; standard cost is the amount to produce one unit of product.
D)standard price is the amount to produce one

Question 64

Because people talk about wage rates rather than wage prices,we refer to standard direct labor prices as direct labor rates,expressed as

A)per direct labor hour
B)per unit
C)a percentage
D)All of these answer choices are correct.

Question 65

A company may set standards for the maximum cost that should be incurred to produce a

A)in the planning budgeting process.
B)in evaluating how well manufacturing operations are managed.
C)both in the planning budgeting process and in evaluating how well manufacturing operations are managed.
D)neither in the planning budgeting process nor in evaluating how well manufacturing operations are managed.

Question 66

In setting the direct labor quantity standard,allowances are made for

A)rest time.
B)machine down time.
C)both rest time and machine down time.
D)neither rest time nor machine down time.

Question 67

In the manufacturing of swim suits,in addition to the price of fabric,the standard materials price also includes

A)cost of shipping.
B)volume discounts.
C)taxes.
D)All of these answer choices are correct.

Question 68

The standard cost of direct material is the

A)standard price of direct material input x standard quantity of direct material inputs.
B)standard price of direct material input x actual quantity of direct material inputs.
C)actual price of direct material input x standard quantity of direct material inputs.
D)Actual price of direct material input x actual quantity of direct material inputs.

Question 69

The time needed to produce one

A)the direct labor efficiency standard.
B)the direct labor time standard.
C)the direct labor quantity standard.
D)None of these answer choices are correct.

Question 70

The calculation for the standard direct labor cost is

A)standard wage rate per direct labor hour x actual quantity of direct labor hours.
B)standard wage rate per direct labor hour x standard quantity of direct labor hours.
C)actual wage rate per direct labor hour x standard quantity of direct labor hours.
D)actual wage rate per direct labor hour x actual quantity of direct labor hours.

Question 71

The standard price of direct labor includes which of the following items?

A)FICA taxes
B)health insurance
C)retirement contributions
D)All of these answer choices are correct.

Question 72

The amounts to be included in the standard price of direct labor is generally provided by

A)each employee's supervisor.
B)the plant manager.
C)the payroll department.
D)the CFO.

Question 73

The position responsible for negotiating a volume discount would be

A)purchasing agent.
B)production manager.
C)accounts payable supervisor.
D)None of these answer choices are correct.

Question 74

In the manufacturing of swim suits,in addition to the price of fabric,the standard materials price includes all of the following items except

A)cost of shipping.
B)cost of advertising.
C)volume discount.
D)All of these answer choices are included in the standard price.

Question 75

Direct materials standards specify both

A)quantity and efficiency.
B)quantity and price.
C)efficiency and price.
D)quality and usage.

Question 76

The predetermined overhead rate is calculated by

A)dividing the budgeted activity level of application base by the budgeted total manufacturing overhead.
B)multiplying the budgeted activity level of application base by the budgeted total manufacturing overhead.
C)dividing the budgeted total manufacturing overhead by the budgeted activity level.
D)multiplying the budgeted total manufacturing overhead by the budgeted activity level.

Question 77

In setting the direct labor quantity standard,allowances are made for

A)Rest time.
B)Defective units.
C)Both rest time and defective units.
D)Neither rest time nor defective

Question 78

The amounts to be included in the standard price of direct labor is generally provided by

A)each employee's supervisor.
B)the human resources department.
C)the plant manager.
D)the controller.

Question 79

In setting the direct labor quantity standard,estimated time can be derived from

A)published benchmark studies.
B)time-and-motion studies.
C)both published benchmark studies and time-and-motion studies.
D)neither published benchmark studies nor time-and-motion studies.

Question 80

In setting the direct labor quantity standard,allowances are made for such items as rest time and machine down-time,based on estimates made by

A)controller.
B)engineering department.
C)human resources department.
D)None of these answer choices are correct.