Question 1

What is "budget momentum"?

Accepted Answer

Budget momentum refers to the practice of allocating funds to a unit in future budgets primarily because it has received funding in the past, often regardless of its current needs or performance.

Question 2

The ________ requires a manager to start with the previous year's budget and then present arguments for why the upcoming year's budget should be increased or decreased.

Accepted Answer

The incremental budgeting approach involves starting with the previous year's budget and making adjustments based on arguments for increased or decreased funding. The other options listed, performance-based budgeting, zero-based budgeting, and income-based budgeting, all have different processes for determining budget allocations that do not involve starting with the previous year's budget.

Question 3

What is the major problem with the goal,"We will become the best in the business"?

Accepted Answer

The goal "We will become the best in the business" is not specific enough because it does not provide clear criteria for what constitutes "the best."

Question 4

Based on the available forecasts,a business' sales are expected to drop 20 percent in the current year as compared to the previous year.Which of the following will be a cascading effect of this forecast?

Accepted Answer

A drop in sales often leads to reduced hiring as the company may not need as many employees to handle lower sales volumes.

Question 5

A company's vice president says,"I think we should do away with the practice of using forecasts as a basis for our plans.The results are not fully accurate." Which of the following would be the best rebuttal to this statement?

Accepted Answer

Forecasts are not intended to be 100% accurate, but rather to provide a general idea of the direction of future business. Eliminating the use of forecasts altogether could potentially leave the company without any guiding analysis of the external business environment. The fact that forecasting has not yielded exact results in the past does not mean that it will not do so in the future, but it is important to recognize that forecasts should not be relied upon as a guarantee of future outcomes. Option A is not a strong rebuttal as it relies on the possibility that forecasts may become more accurate in the future, rather than addressing the immediate concern raised by the VP. Option B is not relevant to the discussion at hand, as it describes other industries rather than the company's specific situation. Option D may be true, but does not address the validity of using forecasts as a basis for planning.

Question 6

Which of the following is NOT necessarily true about the goal,"We will achieve a 12 percent return on assets in the next six months"?

Accepted Answer

The goal may not be realistic as it depends on several factors such as market conditions, industry trends, and the company's financial performance. Achieving a 12 percent return on assets may not be feasible for all companies in all industries.

Question 7

Which of the following statements is true of budgeting?

Accepted Answer

The answer of Which of the following statements is true...

Question 8

Which of the following is a reason why goals that are too easy to achieve are usually ineffective?

Accepted Answer

Goals that are too easy to achieve usually do not deliver substantial results because they do not challenge employees or incentivize them to go beyond their current level of performance. As a result, these goals can lead to complacency and a lack of motivation to continuously strive for improvement.

Question 9

Which of the following is NOT one of the five characteristics of effective goals?

Accepted Answer

Abstractness is not one of the characteristics of effective goals. In fact, goals should be specific, measurable, and have a clear level of commitment to ensure they are effective.

Question 10

A(n)________ typically includes all primary activities on which the unit or organization plans to spend money and the amount allocated for each item during the year.

Accepted Answer

An expense budget typically includes all primary activities on which the unit or organization plans to spend money and the amount allocated for each item during the year.

Question 11

Describe operational plans and their importance for an organization.

Accepted Answer

The answer of Describe operational plans and their importance for...

Question 12

The executive of a certain company states that the firm should adopt the benchmark practices only of other firms in the same industry,as business conditions in other industries are significantly different.Which of the following is the underlying assumption in his argument?

Accepted Answer

The answer of The executive of a certain company states...

Question 13

A catering company manager is proposing the purchase of a new van to enable the company to handle more deliveries.She is working on ________.

Accepted Answer

The purchase of a new van is a capital expenditure, which involves significant investment in a long-term asset. Therefore, the catering company manager is likely working on a capital expenditure budget to forecast and plan for the purchase and the associated costs. A sales pitch would be used to persuade customers to buy the company's catering services, an operating budget would be used to forecast and plan for day-to-day expenses, and a contingency plan would be used to address potential risks or unexpected events.

Question 14

A manager tells his sales staff that he wants sales to increase by 18 percent during this year.Even though they are skeptical about whether this goal can be reached,most of them agree to it.However,they were unable to meet the target at the end of the year.Which of the following would best explain the failure to meet this goal?

Accepted Answer

If the employees are only superficially committed to the goal, they are not fully invested in achieving it, which can result in a failure to meet the target.

Question 15

A(n)________ budget outlines how much money an organization needs,and it is submitted to a superior or a budget review committee.

Accepted Answer

A proposed budget is a preliminary plan that outlines how much money an organization needs, and it is submitted to a superior or a budget review committee for approval. The proposed budget serves as a basis for negotiation and discussion between the department or unit requesting funds and the budget review committee. The approved budget is the final version of the plan that has received the necessary approvals and is used as a guideline for the organization's spending during the budget period. A pro forma budget is a projected or forecasted budget that estimates the organization's revenue and expenses for a future period, while a linked budget is a method of budgeting where the budgets of different departments or units are linked together to achieve overall organizational goals.

Question 16

Write a short note on strategic plans.

Accepted Answer

The answer of Write a short note on strategic plans....

Question 17

Which one of the following is a benefit of zero-based budgeting?

Accepted Answer

Zero-based budgeting requires managers to justify each item in their budget, rather than relying on the previous year's budget as a starting point. This means that items that cannot be justified on their current merits will not be allocated money, which can lead to more efficient use of resources.

Question 18

A(n)________ specifies the amount of money the manager is authorized to spend and what items can be purchased or what expenses are allowed.

Accepted Answer

An approved budget is the correct answer because it is the budget that has been officially sanctioned by the relevant authority, giving the manager the authorization to spend a specified amount of money on certain items or expenses.

Question 19

The sales forecasts for the summer season for LocoPoco,a beverage company,indicated increased demand for its colas.However,the actual sales were 30 percent lower than expected.Which of the following could explain the apparent discrepancy above?

Accepted Answer

B  D  A) If research reports revealed harmful additives in colas, consumers might avoid purchasing them, leading to lower sales.  B) The launch of a new brand of bottled water by competitors could have shifted consumer preference away from colas.  D) A reduction in the advertising budget could lead to less consumer awareness and interest, resulting in lower sales.

Question 20

Altering the time frame for a goal is most likely to affect ________.

Accepted Answer

Altering the time frame for a goal is likely to affect the realism of the goal. Changing the time frame can make the goal more or less achievable, realistic or practical. For example, if a goal to lose 10 pounds in a week is unrealistic, extending the timeline to a month or two can make the goal more feasible and realistic. Alternatively, shortening the timeline can make the goal more challenging and ambitious.

Quiz 5: Planning