Question 1

If a company produces and sells goods to order,the sales budget and production budget are identical.A company that produces and sells goods to order would not carry a finished goods inventory,which is the difference between a sales budget and a production budget.

Accepted Answer

Since the company produces and sells goods to order, there is no need to carry a finished goods inventory. As a result, the sales budget and production budget will be identical.

Question 2

An advantage of budgeting is that it requires managers to evaluate why things did not progress according to the plan.This is not a requirement of budgeting,although managers can use budgets in this way.

Accepted Answer

Budgeting does not require managers to evaluate why things did not progress according to plan, but it can be a helpful tool for managers to use in this way.

Question 3

The production budget must be prepared before the sales budget can be prepared.The sales budget is the starting point for preparing the master budget.

Accepted Answer

The sales budget is prepared first and then used as a basis for preparing the production budget.

Question 4

Operating budgets focus on the financial resources needed to support operations.Operating budgets cover the organization's planned operating activities for a particular period;financial budgets focus on the financial resources needed to support operations.

Accepted Answer

The answer of Operating budgets focus on the financial resources...

Question 5

The budget translates a company's objectives into financial terms.The budget's role in the organizing process is to translate the company's objectives into financial terms.

Accepted Answer

The budget is an essential tool to help organizations achieve their objectives. It provides a framework for planning and controlling financial resources and ensures that limited resources are allocated to achieve the most significant return on investment. The budget process typically involves translating strategic objectives into specific goals, determining the financial resources needed to achieve those goals, and allocating resources among different activities and projects.

Question 6

A short-term objective is a specific action managers use to reach their long term goals.A short-term objective is a specific goal that managers need to achieve in no more than a year to reach their long-term goals.

Accepted Answer

The answer of A short-term objective is a specific action...

Question 7

Participative budgeting is more likely to motivate people to work toward the organization's goals than is a top-down approach.This is one of the main advantages of participative budgeting.

Accepted Answer

Participative budgeting involves involving employees in the budgeting process, giving them a sense of ownership and responsibility in the goals and outcomes. This collaborative approach is more likely to motivate individuals to work towards achieving these goals compared to a top-down approach where individuals may feel less invested in the goals and outcomes.

Question 8

Budgeted cost of goods sold reflects all the costs required to manufacture and sell the product.Budgeted cost of goods sold reflects all the costs required to manufacture the product,but not sell it.

Accepted Answer

The statement is incorrect. Budgeted cost of goods sold includes both the costs of manufacturing the product and the costs associated with selling it, such as marketing expenses and shipping costs.

Question 9

Participative budgeting allows employees throughout the organization to have input into the budget-setting process.This is the main purpose of participative budgeting.

Accepted Answer

Participative budgeting involves allowing employees at all levels of the organization to provide input into the budget-setting process. This is done in order to promote better communication, collaboration, and buy-in from employees throughout the organization. By allowing employees to have a say in the budget, organizations can tap into the collective knowledge and expertise of their workforce, and develop a more accurate and realistic budget that reflects the goals and values of the organization as a whole.

Question 10

Budgets that are tight but attainable are less likely to motivate people than budgets that are easy to achieve.Budgets that are tight but attainable are more likely to motivate people than budgets that are either too easy or too difficult to achieve.

Accepted Answer

The answer of Budgets that are tight but attainable are...

Question 11

Budgeted manufacturing overhead includes indirect manufacturing costs,but not selling or administrative costs.Budgeted manufacturing overhead includes all indirect manufacturing costs such as rent,depreciation on equipment,and utilities.

Accepted Answer

Budgeted manufacturing overhead only includes indirect manufacturing costs, not selling or administrative costs. This includes costs such as rent, depreciation, and utilities that are necessary for the manufacturing process.

Question 12

One advantage of participative budgeting is managers can build in budgetary slack.Budgetary slack is a drawback to participative budgeting,not an advantage.

Accepted Answer

Budgetary slack is a drawback to participative budgeting because it involves deliberately overestimating expenses and underestimating revenues in order to create a cushion or buffer in the budget. This can lead to inefficiencies and can make it difficult to accurately track and measure performance. It is not an advantage of participative budgeting.

Question 13

The strategic plan is management's vision of what they desire the organization to achieve over the long term.This is the definition of a strategic plan.

Accepted Answer

This statement defines a strategic plan accurately.

Question 14

Manufacturing firms prepare a separate raw materials purchases budget for each material used in production.Each material should have its own budget.

Accepted Answer

Manufacturing firms prepare separate raw materials purchases budget for each material used in production to accurately track and forecast their inventory and cost of goods sold. This helps them to plan their production activities and ensure they have the necessary materials to meet demand.

Question 15

Control is forward looking while planning is backward looking.Control is backward looking while planning is forward looking.

Accepted Answer

This statement is incorrect. Control is backward looking as it involves comparing actual results with planned outcomes to make adjustments for future performance, while planning is forward looking as it involves setting goals and objectives for future activities.

Question 16

The direct labor budget is based on budgeted sales levels.The direct labor budget is based on budgeted production levels.

Accepted Answer

The direct labor budget is based on budgeted production levels, not sales levels, as it considers the labor required to meet production needs.

Question 17

Budgeted cash collections are based on the sales budget.Budgeted cash collections translates the sales budget into when it is collected in cash.

Accepted Answer

Budgeted cash collections directly relate to the sales budget as they depict when the company expects to receive cash from the sales made. Therefore, the statement is true.

Question 18

The selling and administrative expense budget is related to the production budget.The selling and administrative expense budget includes all the costs related to selling the product and managing the business,not the costs of producing the product.

Accepted Answer

The answer of The selling and administrative expense budget is...

Question 19

Preparing the sales budget includes calculating the revenues to be earned from units sold in addition to the number of units to be sold.Preparation of the sales budget requires multiplying the number of units expected to be sold by the budgeted sales price.

Accepted Answer

The statement is correct. The sales budget involves estimating the revenues from units sold and multiplying the number of units expected to be sold by the budgeted selling price.

Question 20

Top-down budgeting is when the local managers impose a budget on the top management.Top-town budgeting is when top management sets the budget and imposes it on lower levels of the organization.

Accepted Answer

Top-down budgeting is when top management sets the budget and imposes it on lower levels of the organization, not the other way around.

Quiz 8: Budgetary Planning