Question 1

Planning involves gathering feedback to ensure that the plan is being properly executed or modified as circumstances change.

Accepted Answer

False

Question 2

A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels.

Accepted Answer

True

Question 3

In a merchandising company, the required merchandise purchases for a period are determined by subtracting the desired ending inventory from the sum of the units to be sold during the period and the units in beginning inventory.

Accepted Answer

False

Question 4

The basic idea underlying responsibility accounting is that each manager should be held responsible for the overall profit of the company to ensure that all managers are acting together.

Accepted Answer

The basic idea underlying responsibility accounting is that each manager should be held responsible for the revenue, cost, and profit associated with his/her area of responsibility, not the overall profit of the company. This approach ensures that all managers are acting in accordance with the objectives of the company and their particular department.

Question 5

The sales budget is usually prepared before the production budget.

Accepted Answer

The sales budget is typically the first budget prepared, as it sets the basis for the other budgets such as production, direct materials, and direct labor budgets.

Question 6

The number of units to be produced in a period can be determined by adding the expected sales to the beginning inventory and then deducting the desired ending inventory.

Accepted Answer

The answer of The number of units to be produced...

Question 7

When preparing a direct materials budget, the units of raw material needed to meet production should be added to desired ending inventory and the beginning inventory for raw materials should be subtracted to determine the amount of raw materials to be purchased.

Accepted Answer

This is correct. The direct materials budget is calculated by adding the units of raw material needed for production to the desired ending inventory and then subtracting the beginning inventory for raw materials to determine the amount of raw materials to be purchased. This calculation ensures that enough raw materials are available to meet production requirements and maintain adequate inventory levels.

Question 8

The cash budget is typically prepared before the direct materials budget.

Accepted Answer

The direct materials budget is typically prepared before the cash budget since it outlines the expected purchases and costs of materials, which are a significant component in determining cash outflows.

Question 9

The first budget a company prepares in a master budget is the production budget.

Accepted Answer

The answer of The first budget a company prepares in...

Question 10

The manufacturing overhead budget is typically prepared before the production budget.

Accepted Answer

The answer of The manufacturing overhead budget is typically prepared...

Question 11

The cash budget is usually prepared after the budgeted income statement.

Accepted Answer

The cash budget is usually prepared before the budgeted income statement because it helps to determine the cash inflows and outflows of the business, which are important inputs for preparing the income statement.

Question 12

Self-imposed budgets prepared by lower-level managers should be scrutinized by higher levels of management.

Accepted Answer

Higher levels of management should review and approve self-imposed budgets prepared by lower-level managers to ensure accuracy, alignment with organizational goals, and feasibility. This helps in avoiding budgetary discrepancies and ensures maximum utilization of resources.

Question 13

Budgets are used to plan and to control operations.

Accepted Answer

Budgets are usually prepared at the beginning of a period to plan for the allocation of resources necessary to achieve specific objectives. They are then used to monitor performance and control operations throughout the period, making adjustments as necessary to keep operations on track.

Question 14

The direct materials budget is typically prepared before the production budget.

Accepted Answer

The answer of The direct materials budget is typically prepared...

Question 15

In companies that do not have "no lay-off" policies, the total direct labor cost for a budget period is computed by multiplying the total direct labor hours needed to make the budgeted output of completed units by the direct labor wage rate.

Accepted Answer

This statement is true.

Question 16

One disadvantage of a self-imposed budget is that budget estimates prepared by front-line managers are often less accurate and reliable than estimates prepared by top managers.

Accepted Answer

The answer of One disadvantage of a self-imposed budget is...

Question 17

A continuous or perpetual budget is a budget that almost never needs to be revised.

Accepted Answer

A continuous or perpetual budget is a budget that is regularly updated and revised to reflect changes in the business environment and goals. It is not a static budget that remains unchanged indefinitely.

Question 18

In business, a budget is a method for putting a limit on spending.

Accepted Answer

The answer of In business, a budget is a method...

Question 19

A benefit of self-imposed budgeting is that it may allow lower-level managers to create budgetary slack.

Accepted Answer

Self-imposed budgeting typically involves higher levels of participation and accountability, which reduces the likelihood of creating budgetary slack.

Question 20

The sales budget often includes a schedule of expected cash collections.

Accepted Answer

The sales budget often includes a schedule of expected cash collections, as it is important to anticipate when sales revenue will actually be received in cash. This helps with cash management and planning for future expenses.

Quiz 8: Profit Planning