Deck 9: Profit Planning

Question 1

The master budget is typically a comprehensive financial plan for the organization for the past fiscal year.

Answer 1

False

Question 2

Planning is looking ahead to see what actions should be taken to realize particular goals.

Answer 2

True

Question 3

Comparing actual results with budgeted results on a periodic basis provides control in a budgetary system.

Answer 3

True

Question 4

The production budget is prepared in units and in dollars.

Question 5

The budget director is the person responsible for directing and coordinating the organization's overall budgeting process.

Question 6

Budgets are financial plans for the future.

Question 7

The department manager reviews the budget,provides policy guidelines and budgetary goals,and resolves differences that arise as the budget is prepared,approves the final budget,and monitors the actual performance of the organization as the year unfolds.

Question 8

A large difference between actual and planned results is feedback that the system is providing adequate control.

Question 9

Budgets identify objectives and the actions needed to achieve them because they are foresighted financial plans.

Question 10

A firm should develop a strategic plan before preparing a budget.

Question 11

The first budget to be prepared is the sales budget.

Question 12

Communication and coordination are served by budgets.

Question 13

A continuous budget is a moving 12-month budget.

Question 14

Control is achieved by comparing actual results with budgeted results on a periodic basis.

Question 15

The master budget is composed of operating budgets and financial budgets.

Question 16

A strategic plan identifies strategies for future activities and operations,generally covering at least five years.

Question 17

The direct labor budget includes: units to be produced,direct labor time needed per unit,and total direct labor cost for the period.

Question 18

A firm acquires information that can be used to improve decision making from a budgetary system.

Question 19

There are as many direct materials purchases budgets as there are products.

Question 20

The direct materials purchases budget is based on the sales budget.

Question 21

In preparing the direct labor budget,the average wage rate is used to calculate total direct labor cost.

Question 22

__________________ is looking ahead to see what actions should be taken to realize particular goals.

Question 23

Pseudoparticipation is one of the potential problems with participative budgeting.

Question 24

The output of the cost of goods sold budget is entered into the pro forma balance sheet.

Question 25

Budgets improve _________________.

Question 26

A __________________ is a moving 12-month budget.

Question 27

If the initial cash budget indicates a cash deficiency,the company must go out of business.

Question 28

The cash budget includes the beginning balance of cash,cash receipts,cash disbursements,and the ending balance of cash.

Question 29

Myopic behavior is one of the advantages of participative budgeting.

Question 30

Individual behavior that is in basic conflict with the goals of the organization is called goal congruence.

Question 31

Ideally,managers are held accountable for controllable costs.

Question 32

Budgets should be based on ideal standards to encourage everyone to reach for the highest level of performance.

Question 33

Cash receipts must be at least as much as sales.

Question 34

The _________________ is the comprehensive financial plan for the organization as a whole.

Question 35

The ________________ plots a direction for an organization's future activities and operations; it generally covers at least five years.

Question 36

The controller of the company usually serves as the __________________.

Question 37

Cash budgets are often prepared monthly or even weekly.

Question 38

The sales budget is used directly in the development of the production budget.

Question 39

Monetary incentives include salary increases,bonuses,and promotions.

Question 40

The selling and administrative expenses budget is part of the operating budgets.

Question 41

The ____ is the person responsible for directing and coordinating the organization's overall budget process.

A)budget master
B)controller
C)chief financial planner
D)budget director
E)chief accountant

Question 42

In a (n)____,as one month expires,an additional month in the future is added to the budget so that the company always has a 12-month plan on hand.

A)continuous budget
B)financial budget
C)operational budget
D)yearly budget
E)master budget

Question 43

______________ are the means an organization uses to influence a manager to exert effort to achieve an organization's goals.

Question 44

___________________ exists when a manager deliberately underestimates revenues or overestimates cost in an effort to make the future period appear less attractive in the budget than they think it will be in reality.

Question 45

Looking backward to determine what actually happened and comparing it with the previously planned outcomes is

A)control.
B)communicating.
C)decision making.
D)strategic planning.
E)budgeting.

Question 46

Which of the following is an advantage of budgeting?

A)Forces managers to plan.
B)Provides information useful for control.
C)Provides information for improved decision making.
D)Improves communication.
E)All of these.

Question 47

The _______________ tells how many units must be produced to meet sales needs and to satisfy ending inventory requirements.

Question 48

The basic structure of a ______________ includes cash receipts,cash disbursements,any excess or deficiency of cash,and financing.

Question 49

Which of the following budgets can be used for control?

A)Production budget
B)Cash budget
C)Budgeted income statement
D)Selling and administrative expense budget
E)All of these

Question 50

Examples of ________________ include job enrichment,increased responsibility and autonomy,and recognition programs.

Question 51

Salaries expense,advertising expense and depreciation expense would be included in the ______________________ budget.

Question 52

The alignment of managerial and organizational goals is often referred to as _______________.

Question 53

When top management assumes total control of the budgeting process and only seeks superficial participation from lower-level managers this is known as ________________.

Question 54

The __________________ shows the expected cost of all production costs other than direct materials and direct labor.

Question 55

_________________ are used to ensure that budgeted costs can be realistically compared with costs for actual levels of activity.

Question 56

____________________ is individual behavior that is in basic conflict with the goals of the organization.

Question 57

The cash budget and budgeted balance sheet are part of the ________________.

Question 58

_________________ consists of beginning cash balance and the expected cash receipts.

Question 59

Which of the following is a use of budgets for control?

A)Plans can be made for the future.
B)If conditions change between the formation of the budget and the current time,budgets can be quickly adapted.
C)Budgets set a standard against which results can be compared.
D)Communication is improved.
E)All of these.

Question 60

_____________________ allows subordinate managers considerable say in how the budgets are established.

Question 61

Which of the following statements is true?

A)The overhead budget is typically composed of variable overhead and fixed overhead.
B)The direct labor budget uses an average wage rate for direct labor.
C)The production budget is not converted into dollars.
D)The sales budget includes both units and dollars.
E)All of these.

Question 62

Rodriquez Company budgeted the following sales in units: Rodriquez's policy is to have 20% of the following month's sales in inventory.On January 1,inventory equaled 7,500 units.February production in units is

A)20,000.
B)28,000.
C)40,000.
D)26,500.
E)24,000.

Question 63

Galvern Company provided the following data for July: What is the cost of goods sold?

A)$165,000
B)$146,000
C)$214,000
D)$184,000
E)$75,000

Question 64

Depreciation expense on sales equipment appears in a separate line on which of the following budgets?

A)Cash budget
B)Selling and administrative expenses budget
C)Direct labor budget
D)Production budget
E)Overhead budget

Question 65

Budgeted operating income includes

A)budgeted interest expense.
B)budgeted income taxes.
C)budgeted cost of goods sold.
D)budgeted net income.
E)none of these.

Question 66

Budgets are

A)key components of planning.
B)financial plans for the future.
C)an identifier of objectives and the actions needed to achieve them.
D)used for communication and coordination.
E)all of these.

Question 67

Which of the following budgets are needed to calculate a budgeted unit cost?

A)Direct materials purchases budget
B)Direct labor budget
C)Overhead budget
D)Direct materials purchases budget and overhead budget
E)Direct materials purchases budget,direct labor budget,and overhead budget

Question 68

The master budget is

A)the selective financial plan for the organization as a whole.
B)typically for a 1-year period corresponding to the fiscal year of the company.
C)broken down into daily and weekly budgets.
D)used for misinformation and coordination.
E)all of these.

Question 69

In preparing the overhead budget,many companies use

A)activity-based costing.
B)multiple drivers for a simple budget.
C)participative costing.
D)a unit-based driver such as direct labor hours.
E)none of these.

Question 70

A company provided the following information on sales for the coming year: Assuming that the beginning inventory is 3,000 units,and that the company policy is to have 25% of the next quarter's sales in ending inventory,which quarter will have the lowest production?

A)Quarter 4
B)Quarter 3
C)Quarter 2
D)Quarter 1
E)All quarters have the same production

Question 71

A company has had stable sales and production for several years.Next year,sales are expected to increase by at least 50%.Assuming that the company maintains its policy for desired ending inventories of finished product and direct materials purchases,what will be the likely effect on the desired ending inventory of finished product?

A)It will increase
B)It will decrease
C)It will stay the same
D)It will be twice the size of the desired ending inventory of raw materials
E)None of these

Question 72

The ending finished goods inventory budget supplies information needed for the

A)sales budget.
B)cash budget.
C)budgeted income statement.
D)cost of goods sold budget.
E)all of these.

Question 73

The budget that describes how many units must be produced in order to meet sales needs and ending inventory objectives is the

A)production budget.
B)direct materials purchases budget.
C)cash budget.
D)budgeted income statement.
E)none of these.

Question 74

The selling and administrative expenses budget includes

A)cost of goods sold.
B)overhead.
C)fixed production expense.
D)variable cost of selling.
E)all of these.

Question 75

Which of the following is not true?

A)The sales forecast is done before the sales budget.
B)The master budget is the comprehensive plan for the organization as a whole.
C)The production budget is prepared in units and dollars.
D)One approach to forecasting sales is the bottom-up approach.
E)In creating the sales forecast,outside factors such as the state of the economy,should be considered.

Question 76

In budgeting direct labor hours for the coming year,it is important to

A)multiply production in units by the direct labor hours per unit.
B)divide production in units by the direct labor hours per unit.
C)subtract production in units from the direct labor hours per unit.
D)subtract direct labor hours per unit from production in units.
E)multiply production in units by the labor wage rate.

Question 77

Direct materials needed for production is calculated by

A)multiplying units to be produced by direct materials per unit.
B)subtracting units to be produced from direct materials per unit.
C)dividing units to be produced by direct materials per unit.
D)adding units to be produced to direct materials per unit.
E)subtracting direct materials per unit from units to be produced.

Question 78

The first step in creating the master budget is the creation of the

A)production budget.
B)direct labor budget.
C)cash budget.
D)sales budget.
E)budgeted income statement.

Question 79

A company expects the following sales for the coming year: Budgeted sales revenue for the year is

A)$1,050,000
B)$1,260,000
C)$1,155,000
D)$1,130,000
E)it is impossible to tell from this information

Question 80

Belant Company budgeted 200,000 units of production for June,210,000 units for July and 300,000 units for August.Each unit requires 0.25 direct labor hours.How many direct labor hours are budgeted for August?

A)50,000
B)5,000
C)75,000
D)52,500
E)300,000