Deck 13: Planning and Budgeting for Strategic Success

Question 1

It is generally agreed in business that once a budget is set it should not be changed.

Answer 1

False

Question 2

Strategic budgeting is the process of considering the effect alternative courses of action on profits, assets and cash flow management.

Answer 2

True

Question 3

The statement that is true in relation to engineering cost centres is:

A) Planning is more difficult in engineering cost centres than in discretionary cost centres
B) The research and development department of an organisation is likely to be an engineering cost centre
C) In a manufacturing firm departments where standard products are produced are likely to be engineering cost centres
D) All of the statements are true

Answer 3

C

Question 4

The Beyond Budgeting approach believes in rewarding teams of employees with large monetary bonuses.

Question 5

The Beyond Budgeting philosophy does not require the preparation of traditional reports such as income statements and balance sheets.

Question 6

The Beyond Budgeting philosophy means managing without budgets.

Question 7

Beyond Budgeting proponents argue that the key to instilling accountability originates from the belief that employees enjoy contributing to the organisation.

Question 8

To achieve the best results for the organisation, budgets should be geared to promote competition amongst employees rather than cooperation.

Question 9

Achieving the budget mostly means also achieving the organisation's goals.

Question 10

In zero-based budgeting, managers must justify budget amounts as if no information about prior budgets existed.

Question 11

The process of considering the effect of alternative courses of action on profits, assets and cash flow management is known as:

A) strategic budgeting
B) operational budgeting
C) lean budgeting
D) activity based budgeting

Question 12

Kaizen budgeting is designed to improve quality and reduce costs over time.

Question 13

The longer cash remains tied up in inventory and/or accounts receivable the greater the strain on the cash resources and liquidity of the company.

Question 14

A cost center where the relationship between inputs and outputs is readily measurable is known as a discretionary cost center.

Question 15

The core of the Beyond Budgeting movement rests with extreme centralisation.

Question 16

Centralised firms are more likely to use a Beyond Budgeting approach.

Question 17

Planning this year's expenditure based solely on last year's expenditure is generally an efficient form of budgeting.

Question 18

In any planning exercise, profit is regarded as the key independent variable.

Question 19

Kaizen costing is a system used for products that tend to have decreasing prices or increasing quality across time.

Question 20

Dysfunctional behaviour is more likely in discretionary rather than engineering cost centres.

Question 21

The relative performance evaluation approach advocated by the Beyond Budgeting philosophy means employees' performance is evaluated against:

A) their own past performance
B) peer performance
C) yardsticks established by top management
D) all of the above

Question 22

Excessive reliance on budgets can mean:

A) a tendency towards meeting budget targets at any cost
B) a compromise of quality, customer service and long-term performance
C) a and b
D) Neither a nor b

Question 23

Under which of the following types of budgeting must managers justify their budget requests each year as if prior information did not exist?

A) Activity-based budgeting
B) Participative budgeting
C) Zero-based budgeting
D) Flexible budgeting

Question 24

In an activity-based budgeting system, managers develop budgets for each:

A) Cost pool
B) General ledger account
C) Cost driver
D) Activity

Question 25

The Kaizen approach to budgeting was developed in:

A) Japan
B) Germany
C) USA
D) Holland

Question 26

A behaviour that can be fostered by budgets is:

A) empire building
B) game playing
C) excessive dependence on budgets
D) all are behaviours that can be fostered by budgets

Question 27

When an organisation implements activity-based budgeting, managers must identify activities for:

A) Production
B) Support
C) Both production and support
D) Neither production nor support, so long as cost drivers are clearly specified

Question 28

Which of the following is prepared periodically, to always reflect planning changes for a specific future time frame?

A) Flexible budget
B) Static budget
C) Rolling budget
D) Zero-based budget

Question 29

What feature differentiates Kaizen budgeting from other forms of budgeting?

A) It is used for products with decreasing prices over time
B) It is used only in Japan
C) It is used for products with decreasing quality over time
D) It is normally found in companies also using zero-based budgeting

Question 30

Which of these is not part of the Beyond Budgeting approach?

A) top-down planning
B) the use of annual planning cycles
C) rewarding employees for meeting fixed targets
D) none of the above is part of the Beyond Budgeting approach

Question 31

Zero-based budgeting

A) Requires justification for any new increases in requested amounts
B) Means that managers will have less work to prepare their budget requests
C) Requires managers to justify all funds requested
D) Is used as a means of reducing the paperwork involved with the budgeting process

Question 32

The budgeting system which relies on cost pools and cost drivers, is:

A) Activity-based budgeting
B) Traditional budgeting
C) Operational budgeting
D) a. and c

Question 33

A budgeting approach that requires a cost centre to plan its expenditure specifically around the programs or projects conducted by the cost centre is known as:

A) Activity based budgeting
B) Kaizen budgeting
C) Flexible budgeting
D) Program budgeting

Question 34

The key to managing successfully without budgets, as proposed by the Beyond Budgeting philosophy, is:

A) radical decentralisation and accountability
B) reward systems based on relative performance evaluation
C) a high level of trust among employees
D) all of the above

Question 35

The statement relating to the budget as a motivator that is not true is:

A) When all levels of the organisation participate in preparing the budget it has a better chance of acceptance
B) An improperly prepared budget can have an adverse effect on motivation
C) It is best to provide employees with a budget target that is very hard to meet so that they are constantly challenged
D) None of the statements are untrue, i.e. all are true statements

Question 36

Which of these is likely to remain a centralised function with a Beyond Budgeting approach?

A) advertising
B) large capital investment projects
C) setting prices
D) all of the above are likely to remain centralised

Question 37

With traditional budgeting it is untrue that:

A) Many entities adopt policies so that departments lose authority over unspent budget amounts
B) Adding an adjustment to last year's budget, as a means of planning, encourages managers to seek ways to use the organisation's resources more efficiently
C) If actual costs are lower than budgeted costs next year's budget is often cut
D) None of the statements are untrue

Question 38

Producing this year's budget by making alterations to a cost centre's expenditure budget for the previous year is known as:

A) kaizen budgeting
B) rolling budgeting
C) incremental budgeting
D) financial budgeting

Question 39

Which of these is a contemporary approach to budgeting?

A) flexible budgeting
B) static budgeting
C) incremental budgeting
D) none are contemporary approaches to budgeting

Question 40

The primary disadvantage of zero-based budgeting is

A) Its tendency to motivate managers to create budgetary slack
B) It encourages managers to spend all their budgeted money each year to avoid future cutbacks
C) It ignores the input of managers
D) The time it takes to develop a zero-based budget

Question 41

When managers use Kaizen budgeting, which of the following is (are) explicitly embedded in the budget?

A) I and II only
B) I and III only
C) II and III only
D) I, II, and III

Question 42

Which of the following are compatible with kaizen budgeting?

A) Flexible budgeting
B) Activity-based budgeting
C) Neither a nor b are compatible with kaizen budgeting
D) Both a and b are compatible with kaizen budgeting

Question 43

Kaizen budgeting;

A) Sets targeted cost reductions over time
B) Sets targeted quality reductions over time
C) Is basically the same as activity-based budgeting
D) Is incompatible with zero-based budgeting

Question 44

A type of budgeting that is used to develop cost and time budgets for information technology projects is:

A) Extreme programming
B) Flexible programming
C) Extreme activity-based budgeting
D) Rolling programming

Question 45

The main advantage of using a rolling budget is:

A) The role of information technology in its preparation
B) Its incorporation of more current information than a static or a flexible budget
C) The reduced need for lower-level input
D) The ease of calculating variances compared to a static or a flexible budget