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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
2. Budgets are normally used by both profit-making businesses and nonprofit organizations.
a.
True
b.
False
3. When budget goals are set too tight, the budget becomes less effective for planning and controlling operations.
a.
True
Chapter 13
b.
False
4. Employees view budgeting more positively when goals are established for them by senior management.
a.
True
b.
False
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
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
7. Goal conflict can be avoided if budget goals are carefully designed for consistency across all areas of the organization.
a.
True
b.
False
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8. Once a static budget has been determined, it is changed regularly as the underlying activity changes.
a.
True
b.
False
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.
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True
b.
False
Chapter 13
10. Flexible budgeting builds the effect of changes in level of activity into the budget system.
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True
b.
False
11. In preparing flexible budgets, the first step is to identify the fixed and variable components of the various costs and
expenses being budgeted.
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True
b.
False
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
13. The master budget of a small manufacturer would normally include all component budgets that impact the financial
statements.
a.
True
b.
False
Chapter 13
14. The first budget to be prepared is usually the production budget.
a.
True
b.
False
15. The first budget to be prepared is usually the sales budget.
a.
True
b.
False
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
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
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
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
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
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
Chapter 13
22. The production budget is the starting point for preparation of the direct labor cost budget.
a.
True
b.
False
23. The sales budget is the starting point for preparation of the direct labor cost budget.
a.
True
b.
False
Chapter 13
24. Supervisor salaries, maintenance, and indirect factory wages would normally appear in the factory overhead cost
budget.
a.
True
b.
False
25. Supervisor salaries, maintenance, and indirect factory wages would normally appear in the selling and administrative
expenses budget.
a.
True
b.
False
Chapter 13
26. Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget.
a.
True
b.
False
27. The capital expenditure budget summarizes future plans for acquisition of fixed assets.
a.
True
b.
False
Chapter 13
28. The cash budget summarizes future plans for acquisition of fixed assets.
a.
True
b.
False
29. The cash budget presents the expected inflow and outflow of cash for a specified period of time.
a.
True
b.
False
Chapter 13
30. A variable cost system is an accounting system where standards are set for each manufacturing cost element.
a.
True
b.
False
31. Standard costs serve as a device for measuring efficiency.
a.
True
b.
False
Chapter 13
32. Normally standard costs should be revised when labor rates change to incorporate new union contracts.
a.
True
b.
False
33. Standard costs should be revised when they differ from actual costs.
a.
True
b.
False
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
35. The standard cost is a detailed estimate of how much a product should cost.
a.
True
b.
False
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
37. In most businesses, cost standards are established principally by accountants.
a.
True
b.
False
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
39. Currently attainable standards allow for unreasonable production difficulties.
a.
True
b.
False
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
41. Changes in technology, machinery, or production methods may make past cost data irrelevant for future operations.
a.
True
b.
False
