Deck 9: Profit Planning

Question 1

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

Answer 1

True

Question 2

The first budget to be prepared is the sales budget.

Answer 2

True

Question 3

The production budget is prepared in units and in dollars.

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

A continuous budget is a moving 12-month budget.

Question 12

Communication and coordination are served by budgets.

Question 13

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

Question 14

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

Question 15

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

Question 16

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

Question 17

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

Question 18

Budgets are financial plans for the future.

Question 19

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 20

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

Question 21

Identify each item as a component of the production budget or the direct materials purchases budget.
a.production budget
b.direct materials purchases budget
sales in units

Question 22

Identify each item as a component of the production budget or the direct materials purchases budget.
a.production budget
b.direct materials purchases budget
beginning inventory of materials

Question 23

Identify each item as a component of the production budget or the direct materials purchases budget.
a.production budget
b.direct materials purchases budget
ending inventory of product

Question 24

Identify each item as either part of the operating budget or the financial budget.
a.Operating Budget
b.Financial Budget
production budget

Question 25

Cash receipts must be at least as much as sales.

Question 26

Identify each item as a component of the production budget or the direct materials purchases budget.
a.production budget
b.direct materials purchases budget
units of raw materials needed for each unit of product

Question 27

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

Question 28

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

Question 29

Cash budgets are often prepared monthly or even weekly.

Question 30

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

Question 31

Monetary incentives include salary increases, bonuses, and promotions.

Question 32

Ideally, managers are held accountable for controllable costs.

Question 33

Identify each item as either part of the operating budget or the financial budget.
a.Operating Budget
b.Financial Budget
sales budget

Question 34

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

Question 35

Myopic behavior is one of the advantages of participative budgeting.

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

Pseudoparticipation is one of the potential problems with participative budgeting.

Question 41

Identify each item as either part of the operating budget or the financial budget.
a.Operating Budget
b.Financial Budget
budgeted capital expenditures

Question 42

Identify each item as either part of the operating budget or the financial budget.
a.Operating Budget
b.Financial Budget
budgeted balance sheet

Question 43

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

Question 44

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

Question 45

Budgets improve _________________.

Question 46

Identify each item as an advantage or disadvantage of budgeting.
a.advantage
b.disadvantage
provides standard for performance evaluation

Question 47

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

Question 48

Identify each item as either part of the operating budget or the financial budget.
a.Operating Budget
b.Financial Budget
cash budget

Question 49

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

Question 50

The controller of the company usually serves as the __________________.

Question 51

Identify each item as an advantage or disadvantage of budgeting.
a.advantage
b.disadvantage
leads to budgetary slack

Question 52

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

Question 53

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

Question 54

Identify each item as an advantage or disadvantage of budgeting.
a.advantage
b.disadvantage
Pseudoparticipation

Question 55

Identify each item as an advantage or disadvantage of budgeting.
a.advantage
b.disadvantage
improves communication and coordination

Question 56

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

Question 57

Identify each item as either part of the operating budget or the financial budget.
a.Operating Budget
b.Financial Budget
ending finished goods inventory budget

Question 58

Identify each item as an advantage or disadvantage of budgeting.
a.advantage
b.disadvantage
forces managers to plan

Question 59

A __________________ is a moving 12-month budget.

Question 60

Identify each item as an advantage or disadvantage of budgeting.
a.advantage
b.disadvantage
__________________ is looking ahead to see what actions should be taken to realize particular goals.

Question 61

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 62

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

Question 63

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

Question 64

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

Question 65

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 66

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 67

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

Question 68

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 69

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 70

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 71

___________________ 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 72

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

Question 73

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

Question 74

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 75

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 76

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 77

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 78

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

Question 79

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 80

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