1) Indicate whether each of the following statements is true or false.
1>A budget formalizes managerial plans
2>A master budget often provides information about plans and expectations for each
month of the coming year
3>A company that uses a perpetual budget engages in budgeting throughout the year
4>At the end of a period, a company should not compare actual results to the budget
because of the likely effect on employee morale
5>One of the benefits of budgeting is that it promotes coordination and communication
2) Indicate whether each of the following statements is true or false.
1>A flexible budget can be viewed as an extension of a company’s master budget
2>Flexible and static budgets use different per unit standard amounts for variable costs
3>Standards are established for a company’s costs but not for the selling prices of its
goods and services
4>The master budget is a static budget because it generally is prepared for a single
volume of activity
5>If direct materials are budgeted at $34,000 for 10,000 units, direct materials would
also be budgeted at $34,000 for 11,000 units
3) Discuss the regulation of financial accounting, and compare to the level of regulation
of managerial accounting information.
4) Describe the format of an income statement prepared using the contribution margin
approach.
5) Custom Quilters makes decorative comforters, quilted garments, and other products
in a small sewing factory. In 2012, the company expects to make 2,000 comforters.
Indicate whether the given cost is direct or indirect with respect to the comforters, and
also whether it is fixed or variable with respect to the number of comforters. Indicate
your answers by placing X’s in the appropriate columns.