Deck 12: Master Budget and Responsibility Accounting

Question 1

Which of the following is not a question a manager considers in developing successful strategies?

A)What are our objectives?
B)What organizational and financial structures serve us best?
C)Who are our competitors?
D)How do we create value for our customers while distinguishing ourselves from our competitors?
E)Are the markets for our products local,regional,national,or global?

Answer 1

C

Question 2

A ________ is the quantitative expression of a proposed plan of action by management for a specified period and helps managers coordinate the activities that need to be done to implement the plan.

A)pro forma statements
B)strategy
C)budget
D)coordination
E)communication

Answer 2

C

Question 3

Estimates suggest that senior managers spend about ________ of their time on budgeting;and,finance planning departments spend as much as ________ on budgeting.

A)0% - 5%;5%
B)5% - 10%;10%
C)8% - 15%;30%
D)10% - 20%;50%
E)15% - 25%;75%

Answer 3

D

Question 4

Microsoft refers to goals as ________ and distributes firm-level goals across the company,connecting them to organizational,team,and individual commitments.

A)constraint
B)confinements
C)commitments
D)apprehensions
E)accommodation

Question 5

Budgets enable a company's managers to measure actual performance against predicted performance.

Question 6

Budgets should not be administered rigidly.

Question 7

How can managers use the ongoing-budget process to anticipate economy recovery from a recession?

Question 8

Which of the following is not true about the challenges related to the budget process?

A)The budgeting process only involves senior managers.
B)Top managers do not want lower-level managers to participate in the budgeting process.
C)Managers use short periods of time to implement the budgeting process.
D)Lower-level managers who feel that top management does not "believe" in budgets are likely to be active participants in the budget process.
E)Lower-level managers who feel that top management does not "believe" in budgets are unlikely to be active participants in the budget process.

Question 9

Budgets help managers assess strategic risks and opportunities by providing them with feedback about the likely effects of their strategies and plans.

Question 10

Which of the following is not a step related to ongoing-budget related processes that managers cycle through during the course of the fiscal year?

A)Managers take into account past performance,market feedback,and anticipated future changes to initiate plans for the next period.
B)Managers and management work together to develop plans for the company as a whole and the performance of its subunits,such as departments or divisions.
C)At the beginning of the year,senior managers give subordinate managers a frame of reference,a set of specific financial or nonfinancial expectations to compare actual results.
D)During the course of the year,management accountants help managers investigate variations from plans,such as unexpected decline in sales.
E)The use of information technology resulted in less ongoing-budget related processes and managers no longer take into account past performances,market feedback,or anticipated changes in the ongoing-budget related processes.

Question 11

________ is meshing and balancing all aspects of production or service and all departments in a company in the best way for the company to meet its goals.

A)Budget
B)Strategy
C)Operations
D)Coordination
E)Communication

Question 12

Budgeted financial statements are sometimes called:

A)cost centers.
B)profit centers.
C)investment centers.
D)responsibility centers.
E)pro forma statements.

Question 13

Budgeting is less useful when it is integrated with a company's strategy.

Question 14

Which of the following is not true about the framework for judging performance?

A)Budgets enable a company's managers to measure actual performance against predicted performance.
B)A limitation of past results often incorporates past mistakes and substandard performance.
C)Future conditions can be expected to differ from the past.
D)The budget is not the only benchmark companies use to evaluate past performance.
E)Using only the budget fails to create an incentive for subordinates to set targets that are relatively easy to achieve.

Question 15

A ________ expresses management's operating and financial plans for a specified period.

A)strategy
B)coordination
C)master budget
D)communication
E)pro forma statement

Question 16

The budget is the only benchmark companies use to evaluate performance.

Question 17

How do managers use the master budget from the evolution of operating and financing decisions that manager make during the budget process?

Question 18

________ specifies how an organization matches its own capabilities with the opportunities in the marketplace to accomplish its objectives.

A)Budget
B)Strategy
C)Coordination
D)Communication
E)Pro forma statements

Question 19

Which of the following is true about the budgeting process?

A)Managers do not use budgets to compel strategic analysis.
B)Managers do not use budgets to promote communication in the workplace.
C)Managers do not use budgets to promote communication across subunits in the workplace.
D)To be useful,managers must support the budget and be flexible if economic conditions change.
E)To be useful,managers do not support the budget and be flexible if economic conditions change.

Question 20

Some companies refer to budgeting as targeting and other companies refer to budgets as profit plans.

Question 21

Using activity-based cost drivers provide additional and detailed information that improves decision making compared with budgeting solely on output-based cost drivers.

Question 22

What is the concept of the bottom-up perspective of budgeting?

Question 23

The only new information managers need to prepare in the production budget is the level of finished goods inventory the company wants to maintain.

Question 24

Which of the following terms is used to describe an income statement and its supporting budget schedules?

A)Budgetary slack.
B)Financial budget.
C)Financial planning analysis.
D)Operating budget.
E)Activity-based budget (ABB).

Question 25

What are the benefits to managers that use budgets?

Question 26

How do managers react to budgets that challenge the manager?

Question 27

Rolling budgets are the same as:

A)Kaizen budgets.
B)operating budgets.
C)activity-based budgets.
D)rolling forecasts.
E)financial budgets.

Question 28

Which of the following is not a manufacturing overhead cost?

A)Supplies.
B)Supervision.
C)Depreciation.
D)Maintenance.
E)Forecasted costs.

Question 29

A budgeting method that focuses of the budgeted cost of the activities necessary to produce and sell products and services is called a(n)________.

A)financial budget
B)operating budget
C)activity-based budget (ABB)
D)budgetary slack
E)continuous budget

Question 30

Describe the advantages of budgets.

Question 31

Budgeting is a cross-functional activity.

Question 32

Which of the following is used to describe a part of the master budget made up of the capital expenditures budget,the cash budget,the budgeted balance sheet,and the budgeted statement of cash flows?

A)Kaizen budget.
B)Financial budget.
C)Sensitivity analysis.
D)Operating budget.
E)Activity-based budget (ABB).

Question 33

What is a bill of materials? Why do managers use it?

Question 34

The most frequent budget period is one year.

Question 35

The budget costs at companies are different for variable and fixed overhead costs.

Question 36

Statistical approaches,such as regression and trend analysis,help managers when they forecast sales.

Question 37

How do sales managers and sales representatives build the revenue budget?

Question 38

Which of the following is not true about activity-based costing systems?

A)Managers estimate various line items of overhead costs that constitute manufacturing operations overhead.
B)Managers identify opportunities for process and efficiency improvements.
C)Managers determine the resources that they will need from two support departments.
D)The costs of support departments are allocated as part of manufacturing operations overhead.
E)Managers use current data,not historical data,to estimate the cost of supplies per direct labor hour.

Question 39

In the direct manufacturing labor cost budget,labor standards are known as:

A)labor losses.
B)employee relations.
C)accommodated interest.
D)consistent methods of revenue.
E)the time allotted per unit of output.

Question 40

What is the impact of budgeting on employee performance?

Question 41

The Sherry Point Light Foundation has budgeted sales of 45,000 units,target ending finished goods inventory of 8,000 units,and beginning finished goods inventory of 3,000 units.
Required
Compute the number of units that the manager expects to produce next year.

A)25,000 units
B)30,000 units
C)35,000 units
D)45,000 units
E)50,000 units

Question 42

Enterprise resource planning (ERP)systems help managers budget for nonmanufacturing costs.

Question 43

________ is a "what-if" technique that examines how a result will change if the original predicted data are not achieved or if an underlying assumption changes.

A)Cash analysis
B)Master budget
C)Production analysis
D)Sensitivity analysis
E)Financial Planning Model

Question 44

The Bay Manufacturing Company expects to sell 25,000 pens at $26 each.The direct material costs are $5 and direct manufacturing labor is $9,and manufacturing overhead is $1.80 per pen.The following inventory levels apply to 2012:

On the 2013 budgeted income statement,what amount will be reported for sales? How many pencils need to be produced in 2013? Compute the amount of cost of goods sold on the 2013 budgeted income statement.

Question 45

What is the purpose of using financial planning models in sensitivity analysis?

Question 46

Mountain Express,a clothing boutique chain has an operating income of $240,000.The sales revenue of the company was calculated to be $960,000.
Required
Compute the operating profit margin.

A)32%
B)25%
C)17%
D)46%
E)12%

Question 47

Sensitivity analysis is especially useful in incorporating interrelationships into budgeting decisions by managers.

Question 48

An equipment supply manager at a large outlet needs to prepare a Production Budget.The budgeted unit sales amount to 5,200 units.The ending finished goods inventory shows 700 units,and the beginning finished goods inventory shows 1,000 units.
Required
Compute the value of the beginning inventory on the Production Budget.

A)6,500 units
B)5,500 units
C)7,200 units
D)4,800 units
E)5,200 units

Question 49

The managerial accountant at the Chesapeake Bay Circuit Manufacturing Company expects to sell 120,000 circuits in 2013 for $12 each.There are 5,000 circuits in beginning finished goods inventory with target ending inventory of $5,000 circuits.The company keeps no work-in-process inventory.
Required
Compute the amount of sales revenue reported on the 2013 budgeted income statement.

A)$1,000,000
B)$1,200,200
C)$1,440,000
D)$1,300,400
E)$1,600,200

Question 50

What types of risk do managers identify when they implement sensitivity analysis?

Question 51

Prime Time Home Furniture,a warehouse store specializing in bedroom furnishing sets is assembling the revenue budget for the next fiscal year.Sales of the current year indicate that they sold 64,000 units from their Super-Savings line and 12,000 units from their Specialty line.The average price of each Super-Savings unit is $800,while the average price of each Specialty unit is $1,450.
Required
Compute the total revenues? Next,determine which line provides the most revenue.

A)$17,400,000;The Specialty line.
B)$58,600,000;The Super-Savings line.
C)$68,600,000;The Super-Savings line.
D)$23,500,000;The Specialty line.
E)$32,300,000;The Specialty line.

Question 52

Managers can use computer-based systems,such as enterprise resource planning (ERP),to perform calculations for which of these planning models?

A)Cash analysis.
B)Master budget.
C)Production analysis.
D)Sensitivity analysis.
E)Financial Planning Models.

Question 53

As they prepare operating budgets,managers only focus on what they can achieve.

Question 54

________ are mathematical representations of the relationships among operating activities,financing activities,and other factors that affect the master budget.

A)Cash budget
B)Master budget
C)Process budget
D)Production analysis
E)Financial planning models

Question 55

The sales manager for the Tool Box,a fine and large tool and machinery outlet,wants to increase the company's operating profit margin from 20% to 30%.The operating income of the company is $180,000.
Required
Compute the amount of sales revenue needed to achieve the goal?

A)$600,000
B)$485,000
C)$525,000
D)$613,000
E)$500,000

Question 56

Which of the following is not a way that managers use budgeting tools within ERP systems?

A)Simplify budgeting.
B)Perform calculations.
C)Reduce the need to reinput data.
D)Reduce the time required to prepare budgets.
E)Inability to perform calculations for planning models.

Question 57

The rolling budget is constantly updated to reflect the latest information and makes managers responsive to changing conditions and market needs.

Question 58

What are some things that managers focus on as they prepare budgets?

Question 59

Which of the following is not true about ERP systems?

A)Managers can identify sales quantities for different products.
B)Managers can use the software to compute the budgeted manufacturing costs of products.
C)Managers can use ERP to help them budget nonmanufacturing costs in the organization.
D)Managers can use ERP systems to store vast quantities of information about materials.
E)Managers are unable to use ERP systems to compute nonmanufacturing costs.

Question 60

How do managers treat fixed overhead costs in the budget process?

Question 61

The manager is accountable for revenues and costs in:

A)cost centers.
B)profit centers.
C)revenue centers.
D)responsibility centers.
E)organizational centers.

Question 62

________ is the degree if influence that a specific manager has over costs,revenues,or related items for which he or she is responsible.

A)Controllability
B)Controllable cost
C)Cost center
D)Responsibility accounting
E)Budgetary slack

Question 63

List the four types of responsibility centers and discuss their purpose.

Question 64

________ is an arrangement of lines of responsibility within an organization.

A)Revenue center
B)Responsibility center
C)Responsibility accounting
D)Organization structure
E)Cost center

Question 65

Responsibility accounting helps managers to first focus on whom they should ask to obtain information and not on whom they should blame.

Question 66

What should managers do if they use sensitivity analysis and they detect small declines in operating income? What could happen if direct material prices increase by 6% and the selling prices decline in the next year?

Question 67

A responsibility center can be structured to promote better alignment of individual and company goals.

Question 68

Differences between actual results and budgeted amounts are:

A)budgets.
B)variances.
C)differences.
D)similarities.
E)accounting.

Question 69

A ________ is any cost that is primarily subject to the influence of a given responsibility center manager for a given period.

A)controllability
B)controllable cost
C)cost center
D)responsibility accounting
E)budgetary slack

Question 70

A manager that works at a company that is evaluated as a profit center will more likely consider rush orders important because they impact sales.

Question 71

Differences between actual results and budgeted amounts can help managers implement and evaluate strategies.

Question 72

How can performance reports for responsibility centers change manager's behavior?

Question 73

The manager is accountable for only costs in:

A)cost centers.
B)profit centers.
C)revenue centers.
D)responsibility centers.
E)organizational centers.

Question 74

How do relative performance measures take out the effects of favorable or unfavorable business conditions that are outside the manager's control?

Question 75

Why are rolling budgets always available for a specified future period?

Question 76

How do variances help managers implement and evaluate strategies?

Question 77

________ is a system that measures the plans,budgets,actions,and actual results of each responsibility center.

A)Revenue center
B)Responsibility center
C)Responsibility accounting
D)Organization structure
E)Cost center

Question 78

Budgets coupled with responsibility accounting provide feedback to top management about the performance relative to the budget of different responsibility center managers.

Question 79

________ is a part,segment,or subunit of an organization whose manager is accountable for a specified set of activities.

A)Revenue center
B)Responsibility center
C)Responsibility accounting
D)Organization structure
E)Cost center

Question 80

Which of the following is not true about variances?

A)Variances alert managers to events not easily or immediately evident.
B)Variances permit managers can take corrective actions or exploit available opportunities.
C)Variances prompt managers to probe how well the company has performed in implementing its strategies.
D)Variances sometimes signal managers that their strategies are ineffective.
E)Variances never provide a signal to managers that their strategies are ineffective.