Accounting Chapter 13 A formal written statement of management's plans for the future

Chapter 13

1. A formal written statement of management’s plans for the future, expressed in financial terms, is called a budget.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-NPJA

2. Budgets are normally used by both profit-making businesses and nonprofit organizations.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-NPKG

3. When budget goals are set too tight, the budget becomes less effective for planning and controlling operations.

a.

True

Chapter 13

b.

False

True

Easy

False

JFND-GO3A-EW4D-NPKF

GO4W-NQNBEE

4. Employees view budgeting more positively when goals are established for them by senior management.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-NPKR

5. A budget procedure that provides for the maintenance at all times of a twelve-month projection into the future is called

continuous budgeting.

a.

True

b.

False

Chapter 13

True

Easy

False

JFND-GO3A-EW4D-NPKD

GO4W-NQNBEE

6. The budget procedure that requires all levels of management to start from zero in estimating sales, production, and

other operating data is called zero-based budgeting.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-NPJU

7. Goal conflict can be avoided if budget goals are carefully designed for consistency across all areas of the organization.

a.

True

b.

False

True

Chapter 13

8. Once a static budget has been determined, it is changed regularly as the underlying activity changes.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-NPJT

GO4W-NQNBEE

9. Budgetary slack can be avoided if lower and mid-level managers are requested to support all of their spending

requirements with specific operational plans.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-NPJ1

Chapter 13

10. Flexible budgeting builds the effect of changes in level of activity into the budget system.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-NPJZ

4OTI-GO4W-NQNBEE

11. In preparing flexible budgets, the first step is to identify the fixed and variable components of the various costs and

expenses being budgeted.

a.

True

b.

False

Moderate

Easy

False

JFND-GO3A-EW4D-NPJO

Chapter 13

12. The master budget of a small manufacturer would normally include all necessary component budgets except the

capital expenditures budget.

a.

True

b.

False

Moderate

False

JFND-GO3A-EW4D-NPJI

4OTI-GO4W-NQNBEE

13. The master budget of a small manufacturer would normally include all component budgets that impact the financial

statements.

a.

True

b.

False

True

Moderate

False

JFND-GO3A-EW4D-NPJS

Chapter 13

14. The first budget to be prepared is usually the production budget.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-ROKN

15. The first budget to be prepared is usually the sales budget.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-NPJW

Chapter 13

16. The budgeted volume of production is based on the sum of (1) the expected sales volume and (2) the desired ending

inventory, less (3) the estimated beginning inventory.

a.

True

b.

False

True

Moderate

False

JFND-GO3A-EW4D-ROJ3

17. If Division Inc. expects to sell 200,000 units in 2016, desires ending inventory of 24,000 units, and has 22,000 units

on hand as of the beginning of the year, the budgeted volume of production for 2016 is 198,000 units.

a.

True

b.

False

Moderate

False

JFND-GO3A-EW4D-ROKB

Chapter 13

18. If Division Inc. expects to sell 300,000 units in 2016, desires ending inventory of 22,000 units, and has 24,000 units

on hand as of the beginning of the year, the budgeted volume of production for 2016 is 298,000 units.

a.

True

b.

False

True

Moderate

False

JFND-GO3A-EW4D-ROKG

19. The budgeted volume of production is normally computed as the sum of (1) the expected sales volume and (2) the

desired ending inventory.

a.

True

b.

False

Moderate

False

JFND-GO3A-EW4D-ROJA

Chapter 13

20. The budgeted direct materials purchases are based on the sum of (1) the materials needed for production and (2) the

desired ending materials inventory, less (3) the estimated beginning materials inventory.

a.

True

b.

False

True

Moderate

False

JFND-GO3A-EW4D-ROKR

21. The budgeted direct materials purchases are normally computed as the sum of (1) the materials for production and (2)

the desired beginning inventory.

a.

True

b.

False

Moderate

False

JFND-GO3A-EW4D-ROKF

Chapter 13

22. The production budget is the starting point for preparation of the direct labor cost budget.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-ROJU

23. The sales budget is the starting point for preparation of the direct labor cost budget.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-ROKD

Chapter 13

24. Supervisor salaries, maintenance, and indirect factory wages would normally appear in the factory overhead cost

budget.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-ROJT

25. Supervisor salaries, maintenance, and indirect factory wages would normally appear in the selling and administrative

expenses budget.

a.

True

b.

False

Moderate

False

JFND-GO3A-EW4D-ROJ1

GO4W-NQNBEE

Chapter 13

26. Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget.

a.

True

b.

False

Moderate

False

JFND-GO3A-EW4D-ROJZ

GO4W-NQNBEE

27. The capital expenditure budget summarizes future plans for acquisition of fixed assets.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-ROJO

GO4W-NQNBEE

Chapter 13

28. The cash budget summarizes future plans for acquisition of fixed assets.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-ROJI

GO4W-NQNBEE

29. The cash budget presents the expected inflow and outflow of cash for a specified period of time.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-ROJS

4OTI-GO4W-NQNBEE

Chapter 13

JFND-GO3A-EW4D-ROJW

GO4W-NQNBEE

30. A variable cost system is an accounting system where standards are set for each manufacturing cost element.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-RO1N

GO4W-NQNBEE

31. Standard costs serve as a device for measuring efficiency.

a.

True

b.

False

True

Easy

False

Chapter 13

32. Normally standard costs should be revised when labor rates change to incorporate new union contracts.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-ROT3

33. Standard costs should be revised when they differ from actual costs.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-RO1B

Chapter 13

34. As a device for measuring efficiency, standard cost systems enables management to determine the causes of

differences between what a product should cost and how much it actually costs to produce.

a.

True

b.

False

True

Moderate

False

JFND-GO3A-EW4D-RO1G

35. The standard cost is a detailed estimate of how much a product should cost.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-ROTA

Chapter 13

36. Financial reporting systems that are guided by the principle of exceptions concept focus attention on variances from

standard costs.

a.

True

b.

False

True

Moderate

False

JFND-GO3A-EW4D-RO1R

37. In most businesses, cost standards are established principally by accountants.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-RO1F

Chapter 13

38. Ideal standards are developed under conditions that assume no idle time, no machine breakdowns, and no materials

spoilage.

a.

True

b.

False

True

Easy

False

JFND-GO3A-EW4D-ROTU

GO4W-NQNBEE

39. Currently attainable standards allow for unreasonable production difficulties.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-RO1D

Chapter 13

40. The fact that workers are unable to meet a properly determined direct labor standard is sufficient cause to change the

standard.

a.

True

b.

False

Easy

False

JFND-GO3A-EW4D-ROTT

41. Changes in technology, machinery, or production methods may make past cost data irrelevant for future operations.

a.

True

b.

False

True

Moderate

False

JFND-GO3A-EW4D-ROTO

JFND-GO3A-EW4D-ROT1