Deck 9: Profit Planning

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

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

Question 5

Communication and coordination are served by budgets.

Question 6

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

Question 7

The production budget is prepared in units and in dollars.

Question 8

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

Question 9

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

Question 10

A continuous budget is a moving 12-month budget.

Question 11

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

Question 12

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

Question 13

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

Question 14

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 15

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

Question 16

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

Question 17

Budgets are financial plans for the future.

Question 18

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

Question 19

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

Question 20

The first budget to be prepared is the sales budget.

Question 21

MATCHING
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

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

Question 23

MATCHING
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 24

Ideally, managers are held accountable for controllable costs.

Question 25

Identify each item as either part of the operating budget or the financial budget.
a. Operating Budget
b. Financial Budget
5. production budget
6. sales budget
7. cash budget
8. ending finished goods inventory budget
9. budgeted balance sheet
10. budgeted capital expenditures
sales budget

Question 26

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

Question 27

MATCHING
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 28

Pseudoparticipation is one of the potential problems with participative budgeting.

Question 29

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

Question 30

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

Question 31

Cash budgets are often prepared monthly or even weekly.

Question 32

Monetary incentives include salary increases, bonuses, and promotions.

Question 33

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

Question 34

Myopic behavior is one of the advantages of participative budgeting.

Question 35

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

Question 36

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

Question 37

Identify each item as either part of the operating budget or the financial budget.
a. Operating Budget
b. Financial Budget
5. production budget
6. sales budget
7. cash budget
8. ending finished goods inventory budget
9. budgeted balance sheet
10. budgeted capital expenditures
production budget

Question 38

Cash receipts must be at least as much as sales.

Question 39

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

Question 40

MATCHING
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 41

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

Question 42

Identify each item as either part of the operating budget or the financial budget.
a. Operating Budget
b. Financial Budget
5. production budget
6. sales budget
7. cash budget
8. ending finished goods inventory budget
9. budgeted balance sheet
10. budgeted capital expenditures
cash budget

Question 43

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

Question 44

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

Question 45

Identify each item as either part of the operating budget or the financial budget.
a. Operating Budget
b. Financial Budget
5. production budget
6. sales budget
7. cash budget
8. ending finished goods inventory budget
9. budgeted balance sheet
10. budgeted capital expenditures
ending finished goods inventory budget

Question 46

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

Question 47

Identify each item as an advantage or disadvantage of budgeting.
a. advantage
b. disadvantage
11. Pseudoparticipation
12. forces managers to plan
13. improves communication and coordination
14. leads to budgetary slack
15. provides standard for performance evaluation
improves communication and coordination

Question 48

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

Question 49

Identify each item as an advantage or disadvantage of budgeting.
a. advantage
b. disadvantage
11. Pseudoparticipation
12. forces managers to plan
13. improves communication and coordination
14. leads to budgetary slack
15. provides standard for performance evaluation
leads to budgetary slack

Question 50

Identify each item as an advantage or disadvantage of budgeting.
a. advantage
b. disadvantage
11. Pseudoparticipation
12. forces managers to plan
13. improves communication and coordination
14. leads to budgetary slack
15. provides standard for performance evaluation
Pseudoparticipation

Question 51

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

Question 52

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

Question 53

A __________________ is a moving 12-month budget.

Question 54

Budgets improve _________________.

Question 55

The controller of the company usually serves as the __________________.

Question 56

Identify each item as either part of the operating budget or the financial budget.
a. Operating Budget
b. Financial Budget
5. production budget
6. sales budget
7. cash budget
8. ending finished goods inventory budget
9. budgeted balance sheet
10. budgeted capital expenditures
budgeted capital expenditures

Question 57

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

Question 58

Identify each item as either part of the operating budget or the financial budget.
a. Operating Budget
b. Financial Budget
5. production budget
6. sales budget
7. cash budget
8. ending finished goods inventory budget
9. budgeted balance sheet
10. budgeted capital expenditures
budgeted balance sheet

Question 59

Identify each item as an advantage or disadvantage of budgeting.
a. advantage
b. disadvantage
11. Pseudoparticipation
12. forces managers to plan
13. improves communication and coordination
14. leads to budgetary slack
15. provides standard for performance evaluation
forces managers to plan

Question 60

Identify each item as an advantage or disadvantage of budgeting.
a. advantage
b. disadvantage
11. Pseudoparticipation
12. forces managers to plan
13. improves communication and coordination
14. leads to budgetary slack
15. provides standard for performance evaluation
provides standard for performance evaluation

Question 61

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

Question 62

___________________ 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 63

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

Question 64

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 65

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

Question 66

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 67

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

Question 68

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 69

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 70

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

Question 71

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 72

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

Question 73

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 74

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

Question 75

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 76

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 77

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 78

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

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

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.