Question 1

In preparing a master budget for a commercial entity,the last schedule prepared is usually the cash budget which summarizes all the previously prepared schedules and provides all information required for control purposes.

Accepted Answer

False

Question 2

The beginning cash balance is not included on the cash budget since the cash budget deals exclusively with cash flows rather than with balance sheet amounts.

Accepted Answer

The beginning cash balance is included in the cash budget as it is the starting point for forecasting the cash flows (inflows and outflows) during the budget period, leading to the ending cash balance.

Question 3

The production budget includes detailed information as to the number of units of direct materials and the number of direct labour hours required for each budget period for a manufacturing business.

Accepted Answer

False

Question 4

The direct materials to be purchased for a period can be obtained by subtracting the desired ending inventory of direct materials from the total direct materials needed for the period.

Accepted Answer

The direct materials to be purchased for a period are obtained by adding the desired ending inventory of direct materials to the total direct materials needed for the period and then subtracting the beginning inventory of direct materials.

Question 5

In zero-based budgeting,the preparers are required to justify all expenditures,not just changes in the budget from the previous year.

Accepted Answer

Zero-based budgeting requires a justification for all expenditures, not just changes from the previous year.

Question 6

Budgets are used for planning rather than for control of operations.

Accepted Answer

The answer of Budgets are used for planning rather than...

Question 7

Sales forecasts are drawn up after the cash budget has been completed since only then are the funds available for marketing known.

Accepted Answer

Sales forecasts are typically drawn up before the cash budget is completed, as they inform decisions about marketing and revenue projections which in turn impact the cash budget.

Question 8

On a budgeted balance sheet,the cash number is the ending cash balance as projected by the cash budget.

Accepted Answer

A budgeted balance sheet is based on projected numbers, including the projected ending cash balance as determined by the cash budget.

Question 9

In companies that have "no lay-off" policies,the total direct labour cost for a budget period is computed by multiplying the total direct labour hours needed to make the budgeted output of completed units by the direct labour wage rate.

Accepted Answer

The answer of In companies that have "no lay-off" policies,the...

Question 10

As the sales forecast is the usual starting point for budgeting,not-for-profit entities do not prepare budgets as they have no sales.

Accepted Answer

While not-for-profit entities may not have sales in the traditional sense, they still have sources of revenue and expenses that need to be budgeted for. Examples of revenue for not-for-profit organizations can include donations, grant funding, and fees for services, while expenses could include salaries, rent, and program costs. Therefore, not-for-profit entities do prepare budgets.

Question 11

A multi-tiered business's standing budget committee prepares all the detailed budgets for all components of the organization.

Accepted Answer

While the standing budget committee may oversee and approve the budgets for all components of the organization, typically the detailed budgets are prepared by specific departments or individuals in charge of those budgets.

Question 12

Budgets describe in financial terms the plans to achieve an entity's strategic objectives.

Accepted Answer

Budgets are financial plans that outline how an entity will allocate its resources in order to achieve its strategic objectives.

Question 13

A self-imposed budget can be a very effective device to control and evaluate a manager's performance in an organization.

Accepted Answer

A self-imposed budget can serve as a benchmark for a manager's performance in staying within budget limits and achieving desired outcomes. It enables a manager to monitor and evaluate their performance against budgeted objectives and make necessary adjustments to actual spending. Therefore, a self-imposed budget is an effective tool to control and evaluate a manager's performance in an organization.

Question 14

In a traditional incremental approach to budgeting,there is usually the assumption that the previous year's budget is used as a starting point.

Accepted Answer

In a traditional incremental approach to budgeting, the previous year's budget is often used as a starting point, with adjustments and modifications made as necessary.

Question 15

The usual starting point in budgeting for a for-profit organization is to make a forecast of cash receipts and cash disbursements.

Accepted Answer

The usual starting point in budgeting for a for-profit organization is often the sales forecast or revenue projections, not directly the forecast of cash receipts and cash disbursements. Cash flow planning is a subsequent step that depends on the sales forecast, production or service delivery plans, and other budget elements.

Question 16

When using the self-imposed budget approach,it is generally best for top management to accept all budget estimates without question in order to minimize adverse behavioural responses from employees.

Accepted Answer

Top management should scrutinize the budget estimates to ensure their accuracy and alignment with organizational goals. Accepting all estimates without question can lead to unrealistic expectations and lower motivation among employees.

Question 17

A production budget is to a manufacturing firm as a merchandise purchases budget is to a merchandising firm.

Accepted Answer

Both types of budgets are used to plan and control the costs associated with producing or purchasing goods for sale.

Question 18

In the merchandise purchases budget,the required purchases (in units)for a period can be determined by subtracting the beginning merchandise inventory (in units)from the budgeted sales (in units).

Accepted Answer

The answer of In the merchandise purchases budget,the required purchases...

Question 19

Control involves developing objectives and preparing the various budgets to achieve those objectives.

Accepted Answer

Control involves monitoring and evaluating performance, and taking corrective action to ensure that objectives are achieved; developing objectives and preparing budgets are part of the planning process, not control.

Question 20

One of the distinct advantages of a budget is that it can help to uncover potential bottlenecks before they occur.

Accepted Answer

By creating a budget, a business can identify areas where expenses may exceed revenue, and take proactive measures to avoid financial problems. This can include identifying potential bottlenecks in production or operations before they become major issues.

Quiz 7: Profit Planning