Question 1

The budget process involves doing all of the following except

Accepted Answer

The budget process involves establishing specific goals, executing plans to achieve those goals, and periodically comparing actual results with the goals to determine if adjustments need to be made. However, dismissing all managers who fail to achieve operational goals specified in the budget is not part of the budget process. While accountability for meeting budget goals is important, firing all managers who do not meet those goals may not always be the most effective solution.

Question 2

Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget.

Accepted Answer

Supervisor salaries and indirect factory wages are not considered direct labor costs as they are not directly associated with the production of goods or services. Direct labor costs refer to the wages and benefits paid to employees directly involved in the production process, such as assembly line workers or machine operators. Supervisor salaries and indirect factory wages would typically be included in the manufacturing overhead cost budget, which is separate from the direct labor cost budget.

Question 3

The sales budget is the starting point for preparation of the direct labor cost budget.

Accepted Answer

The answer of The sales budget is the starting point...

Question 4

The budgeted direct materials purchases is based on the sum of 1) the materials needed for production and 2) the desired ending materials inventory, less 3) the estimated beginning materials inventory.

Accepted Answer

This statement accurately describes the process of calculating the budgeted direct materials purchases.

Question 5

The budgeted balance sheet assumes that all operating and financing plans are met.

Accepted Answer

The budgeted balance sheet is a projection of assets, liabilities, and equity based on the assumption that all operating and financing plans will be met. However, if plans are not met, the actual balance sheet may deviate from the budgeted balance sheet.

Question 6

The production budget is the starting point for preparation of the direct labor cost budget.

Accepted Answer

The direct labor cost budget is based on the production budget, as it takes into account the amount of labor required to produce the units or services specified in the production budget.

Question 7

A formal written statement of management's plans for the future, expressed in financial terms, is a

Accepted Answer

A formal written statement of management's plans for the future, expressed in financial terms, is a budget. A gross profit report is a financial statement that shows revenue, cost of goods sold, and gross profit. A responsibility report is a report that details the performance of a specific individual or department. A performance report is a report used to assess the performance of a company, a department, or an individual.

Question 8

Detailed supplemental schedules based on department responsibility are often prepared for major items in the operating expenses budget.

Accepted Answer

Detailed supplemental schedules are often prepared to track major items in the operating expenses budget, based on department responsibility.

Question 9

The budgeted volume of production is normally computed as the sum of 1) the expected sales volume and 2) the desired ending inventory.

Accepted Answer

The answer of The budgeted volume of production is normally...

Question 10

The cash budget summarizes future plans for acquisition of fixed assets.

Accepted Answer

The cash budget summarizes future plans for the inflow and outflow of cash, not specifically for the acquisition of fixed assets.

Question 11

The capital expenditures budget is part of the planned investing activities of a company.

Accepted Answer

The capital expenditures budget includes plans and estimates for the company's investments in capital assets like property, plant, and equipment. This falls under the investing activities in the cash flow statement.

Question 12

Supervisor salaries, maintenance, and indirect factory wages would normally appear in the operating expenses budget.

Accepted Answer

The answer of Supervisor salaries, maintenance, and indirect factory wages...

Question 13

The cash budget presents the expected inflow and outflow of cash for a specified period of time.

Accepted Answer

The cash budget is a financial statement that presents the expected cash inflows and outflows for a specific period of time, typically a month or a year. It helps businesses and individuals to manage their cash flow and plan for future expenses and investments.

Question 14

If Division Inc. expects to sell 200,000 units in the current year, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for the year is 198,000 units.

Accepted Answer

The budgeted volume of production for the year can be calculated as:

Budgeted production = Expected sales + Ending inventory - Beginning inventory
Budgeted production = 200,000 + 24,000 - 22,000
Budgeted production = 202,000

Therefore, the correct answer is B.

Question 15

The cash budget is affected by the sales budget, the various budgets for manufacturing costs and operating expenses, and the capital expenditures budget.

Accepted Answer

The cash budget is influenced by various other budgets, including sales budget, manufacturing budget, operating budget, and capital budget.

Question 16

The capital expenditures budget details future plans for acquisition of fixed assets.

Accepted Answer

The capital expenditures budget outlines the company's plans for allocating funds towards the purchase, improvement, and maintenance of fixed assets.

Question 17

If Division Inc. expects to sell 200,000 units in the current year, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for the year is 202,000 units.

Accepted Answer

To meet the sales and desired ending inventory levels, Division Inc. needs to produce enough units to cover the sales and increase inventory to the desired level. This is calculated as follows: Sales (200,000 units) + Desired Ending Inventory (24,000 units) - Beginning Inventory (22,000 units) = 202,000 units needed for production.

Question 18

The budgetary unit of an organization which is led by a manager who has both the authority over and responsibility for the unit's performance is known as a

Accepted Answer

A responsibility center is a unit within an organization that is led by a manager who has the authority and responsibility over the unit's performance, including its budget. The manager is accountable for ensuring that the unit meets its goals and objectives, which are aligned with the organization's overall strategy. This type of structure allows for greater control and accountability over the use and allocation of resources within the organization. The other options, control center, budgetary area, and managerial department, do not accurately describe this type of organizational unit.

Question 19

Supervisor salaries, maintenance, and indirect factory wages would normally appear in the factory overhead cost budget.

Accepted Answer

All of these expenses are indirect costs associated with the factory and would be included in the factory overhead cost budget.

Question 20

The budgeted direct materials purchases is normally computed as the sum of 1) the materials for production and 2) the desired ending inventory.

Accepted Answer

The answer of The budgeted direct materials purchases is normally...

Quiz 21: Budgeting