Question 1

Financial budgets include the:

Accepted Answer

The answer of Financial budgets include the:
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Question 2

Maintaining a constant production level in a firm has the advantage of:

Accepted Answer

Maintaining a constant production level allows for a stable employment level, which can have a positive impact on employee morale and reduce turnover. It also helps in managing labor costs and reducing the need for hiring and firing, ultimately leading to a more efficient and stable workforce.

Question 3

Budgeting provides all of the following except:

Accepted Answer

Budgeting does not provide an ethical framework for decision-making, as ethical considerations are typically separate from financial planning and budgeting. However, ethical considerations may be taken into account during the budgeting process.

Question 4

Which one of the following shows the direct materials required for production and their budgeted cost?

Accepted Answer

The answer of Which one of the following shows the...

Question 5

The focal point in budgeting for a service organization is likely to be:

Accepted Answer

In service organizations, the main resource is the human resource (personnel) and therefore the focus should be on personnel planning, such as staff scheduling and training, to ensure efficient and effective service provision. Capital assets acquisition may not be as critical, as services require less capital-intensive assets than manufacturing organizations. Raw material utilization may not be relevant, as service organizations do not work with raw materials. Cost minimization is important but not the main focus, as service organizations rely on the quality of service provision to attract customers. The process of mission development and goal specification is important but not the focal point in budgeting for a service organization.

Question 6

The cash budget does not include:

Accepted Answer

The cash budget only includes cash flows, meaning it only includes actual cash received or paid out. While sales revenues may impact cash inflows, they may not necessarily coincide with the actual receipt of cash, as payment terms or credit sales may extend beyond the budget period. Thus, sales revenues are not included in the cash budget.

Question 7

Which one of the following is a budgeting process that requires managers to prepare budgets based on in-depth reviews of all budget items?

Accepted Answer

Zero-base budgeting (ZBB) requires managers to prepare budgets based on in-depth reviews of all budget items, starting from zero and justifying every expense. It is a more time-consuming and detailed process compared to other budgeting techniques.

Question 8

Unless properly controlled, a "bottom-up" budgeting process can lead to:

Accepted Answer

The answer of Unless properly controlled, a "bottom-up" budgeting process...

Question 9

A negotiated budgeting process is:

Accepted Answer

A negotiated budgeting process combines both "top-down" and "bottom-up" approaches to budget preparation, meaning that both higher-level managers and lower-level staff are involved in the process. This approach allows for more collaboration and buy-in from all levels of the organization, which can result in higher quality budgets and greater employee engagement with the budget goals.

Question 10

Zero-base budgeting (ZBB) differs from traditional budgeting in terms of its requirement to:

Accepted Answer

Zero-base budgeting (ZBB) requires all budgeted operations and associated spending to be justified from scratch, rather than simply adjusting a previous period's budget. This ensures that all expenditures are thoroughly reviewed and examined for their necessity and effectiveness.

Question 11

The effect of increasing the targeted (i.e., desired) ending inventory for a given budget period has the following effect on the production budget for the period:

Accepted Answer

Increasing the targeted ending inventory means that more products need to be on hand at the end of the period. To achieve this, the production budget will need to increase to produce the extra products required to meet the targeted ending inventory level. Therefore, the required production for the budget period increases.

Question 12

Sales forecasting by its nature is:

Accepted Answer

Sales forecasting involves making predictions about the future, which is always uncertain and can be influenced by various factors outside the control of the sales team. Therefore, sales forecasting is somewhat subjective and requires judgement and experience.

Question 13

Which one of the following is a plan that will allow a manufacturing firm to satisfy its sales goals and have on hand the desired amount of inventory at the end of the budget period?

Accepted Answer

The production budget outlines the amount of goods that the manufacturing firm plans to produce during the budget period, taking into account its sales goals and desired ending inventory levels. It is therefore the most appropriate plan for achieving both sales goals and inventory levels. The other options (direct materials usage budget, sales budget, selling and administrative expense budget, and sales forecast) are related to specific aspects of the business but do not directly address the question of how to achieve sales and inventory goals.

Question 14

Budgeting for production (i.e., units to be produced in an upcoming budget period):

Accepted Answer

Budgeting for production involves considering the sales forecast and the desired levels of beginning and ending finished goods inventory. It is prepared before the materials purchases budget in the master budgeting process. JIT production philosophy may not require extensive production budgeting, but it does not mean that it is not needed at all.

Question 15

Which one of the following is a budgeting approach that explicitly demands continuous improvement and that incorporates expected improvements in the resultant budget?

Accepted Answer

Kaizen budgeting is a budgeting approach that explicitly demands continuous improvement and incorporates expected improvements in the resultant budget. It is based on the Japanese business philosophy of Kaizen, which means continuous improvement. Kaizen budgeting involves setting incremental improvement targets and allowing for continuous improvement throughout the budgeting period.

Question 16

The budgeted income statement and budgeted balance sheet benefit a business primarily in terms of the ability of the organization to:

Accepted Answer

The budgeted income statement and budgeted balance sheet summarize the expected financial and operating activities and their impact for an upcoming period, which helps the business plan and make informed decisions.

Question 17

Which of the following is not an alternative approach to traditional budgeting practices?

Accepted Answer

All of the other options (Kaizen budgeting, ZBB, ABB, TDABB) are alternative approaches to traditional budgeting practices, whereas operations budgeting is generally considered to be a traditional budgeting practice itself.

Question 18

A "participative" budget is a(n):

Accepted Answer

A participative budget involves input and collaboration from multiple individuals or departments, making it a good two-way communication device. It involves more participation and input from lower levels of an organization rather than just being a top-down approach. It may not necessarily be a cheaper or zero-based approach to budgeting, and it is considered an alternative budgeting approach to traditional budgeting.

Question 19

The authorization function of budgets is especially important for government and not-for-profit (NFP) entities, where budgeted amounts often serve both as approvals of planned activities (or programs) and as:

Accepted Answer

Budgeted amounts in government and NFP entities often serve as ceilings for expenditures, meaning that spending cannot exceed the authorized budgeted amount. The authorization function ensures that planned activities or programs are aligned with the entity's overall goals and financial resources. Measures of quality, indicators of performance, certification of actions, and the basis for contract negotiations can also be important functions of budgets but are not directly related to authorization.

Question 20

Which of the following is not an advantage of using a "highly achievable target" when constructing budgets?

Accepted Answer

Setting a highly achievable target increases the risk that managers will engage in "earnings management" behavior, aiming to artificially inflate or manipulate their results to match the budget, which can create ethical and legal issues. The other options are advantages of using a highly achievable target when constructing budgets.

Quiz 10: Strategy and the Master Budget