Chapter 10 again

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Chapter 10 again
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2013-11-29 21:31:22
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10 for real
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  1. 1.    The master budget for a given accounting period has all the following except:
    E. It is based on the actual level of sales activity for the period.
  2. 2.    "Budgetary slack" occurs when:
    • D. In order to "meet" budget objectives, employees ask for resources in excess of
    • what they need.
  3. 3.    A master budget is typically prepared for:
    A. A period of one year.
  4. 4.    The successful use of a budgeting system generally involves all of the following except which item?
    D. The budgets include "budgetary slack."
  5. 5.         All of the following are ways of setting the budget, except:
    B. Two-stage budgeting.
  6. 6.    Revision of a completed
    and approved budget:
    A. Should be conducted whenever actual events differ significantly from those envisioned when the budget was prepared.
  7. 7.    The process of planning
    business actions in the near future and expressing them as formal plans of
    action is called:
    A. Budgeting.
  8. 8.    A plan of dollar amounts to be spent on
    long-term projects is called a:
    B. Capital budget.
  9. 9.    A plan that shows the cash balance on hand at the beginning of a budget period, expected cash flow from operations, cash
    flows from investing activities, cash flows from financing activities, and an ending cash balance is called a(n):
    D. Cash budget.
  10. 10. A comprehensive or overall formal plan for a business that includes specific plans for expected sales, the units of product to be produced, the merchandise (or materials) to
    be purchased, the manufacturing, selling, administrative, and general expense
    to be incurred, the long-term assets to be purchased, and the amounts of cash to be borrowed or loans to be repaid, as well as a budgeted income statement and balance sheet, is called a:
    A. Master budget.
  11. 11. A plan that states the units or costs of merchandise to be purchased by a retailer or wholesaler during the budget period is called a:
    B. Merchandise purchases budget.
  12. 12. A plan showing the units of goods expected to be sold and the expected revenue from sales is called the:
    E. Sales budget.
  13. 13. The practice of maintaining budgets for the same number of future periods, revising those budgets as each period is completed and adding a new budget each period, is
    called:
    D. Rolling budgets (or, rolling financial forecasts).
  14. 14. An accounting statement that presents predicted amounts of the company's assets, liabilities, and stockholders' equity as of the end of the budget period is called a(n):
    C. Pro forma balance sheet.
  15. 15. Which of the following budgets is not a financial budget?
    A. Sales budget.
  16. 16. Which of the following is not a potential benefit of having a sound budgeting
    process?
    E. Lower acceptance rate for capital budgeting projects.
  17. 17. Which of the following budgets must be completed before preparing a cash budget?
    A. Cash receipts budget.
  18. 18. Which of the following statements about budgeting is not true?
    E. Budgeting eliminates the need for day-to-day monitoring of operations.
  19. 19. Which of the following factors is least likely to be considered in preparing a sales budget?
    D. The cash budget.
  20. 20. Sales forecasts are the first step in the budgeting process of a merchandising firm because:
    E. Almost all activities of a firm emanate from (i.e., are linked to) estimated sales demand.
  21. 21. Sales forecasting by its nature is:
    D. Somewhat subjective.
  22. 22. Budgeting for production (i.e., units to be produced in an upcoming budget period):
    C. Involves the sales budget and both beginning and ending finished goods inventory amounts.
  23. 23. Maintaining a constant production level in a firm has the advantage of:
    B. Allowing a stable employment level.
  24. 24. The budgeted income statement and budgeted balance sheet benefit a business primarily in terms of the ability of the organization to:
    D. Summarize the impact of the firm's financial and operating activities for an upcoming period.
  25. 25. The focal point in budgeting for
    a service organization is likely to be:
    C. Human resource (i.e.,personnel) planning.
  26. 26. Which of the following is not an alternative approach to traditional budgeting practices?
    E. Operations budgeting
  27. 27. Zero-base budgeting (ZBB) differs from traditional budgeting in terms of its requirement to:
    A. Justify budgeted operations and associated spending.
  28. 28. A "participative" budget is a(n):
    A. Good two-way communication device.
  29. 29. Unless properly controlled, a "bottom-up" budgeting process can lead to:
    B. Easy budget targets.
  30. 30. Budgeting provides all of the following except:
    D. An ethical framework for decision-making.
  31. 31. Financial budgets include the:
    A. Pro forma balance sheet.
  32. 32. The effect of increasing the targeted (i.e., desired) ending inventory for a given budget period has the following effect on the
    production budget for the period:
    A. Increases the required production for the budget period.
  33. 33. The authorization function of budgets is especially important for government and not-for-profit (NFP) entities, where budgeted amounts often serve both as approvals of planned activities (or programs) and as:
    D. Ceilings for expenditures.
  34. 34. Which one of the following is a plan that will allow a manufacturing firm to satisfy its sales goals and have on hand the desired
    amount of inventory at the end of the budget period?
    D. Production budget.
  35. 35. Which one of the following shows the direct materials required for production and their budgeted cost?
    A. Direct materials usage budget.
  36. 36. Which of the following is not an advantage of using a "highly achievable target" when constructing budgets?
    B. Increasing the risk that managers will engage in "earnings management" behavior.
  37. 37. A negotiated budgeting process is:
    C. A combination of "top-down" and "bottom-up" approaches to budget preparation.
  38. 38. The cash budget does not
    include:
    D. All sales revenues.
  39. 39. Which one of the following is a budgeting process that requires managers to prepare budgets based on in-depth reviews of all budget items?
    E. Zero-based budgeting (ZBB)
  40. 40. Which one of the following is a budgeting approach that explicitly demands continuous improvement and that incorporates expected
    improvements in the resultant budget?
    D. Kaizen budgeting.
  41. 41. Consistency between goals of the firm and the goals of its employees is referred to as:
    C. Goal congruence.
  42. 42. A significant advantage of using either an activity-based budgeting (ABB) or a time-driven activity-based budgeting (TDABB) system is:
    B. Estimation of the cost of unused capacity, as a by-product of the budgeting process.
  43. 43. Budgets can serve as the standard against which actual performance is measured. When compensation is based on this comparison, the
    organization is said to use:
    A. Fixed performance contracts.
  44. 44. Critics (e.g., The Beyond Budgeting Roundtable) of traditional budgeting assert that the budgeting process:
    C. Makes too much use of so-called linear compensation plans.
  45. 45. Zero-base budgeting (ZBB):
    D. Involves rigorous review of each cost item before inclusion in the budget.
  46. 46. Wild West Fashion expects the total costs of goods sold to be $30,000 in November and $60,000 in December for one of its young adult suits. Management also wants to have on hand at the end of each month 10 percent of the expected total cost of sales for the following month. What dollar amount of
    suits should be purchased in November?
    C. $33,000.
  47. 47. ACEM Hardware purchased 5,000 gallons of paint in March. The store had 1,500 gallons on hand at the beginning of March, and expects to have 1,000 gallons on hand at the end of March. What is the budgeted number of gallons to be sold during March?
    D. 5,500.
  48. 48. Joe's Mart policy is to have 20% of the next month's sales on hand at the end of the current month. Projected sales for August, September, and October are 25,000 units, 20,000 units, and 30,000 units, respectively. How many units must be purchased in September?
    C. 22,000.
  49. 50. LeMinton Company expects the following credit sales for the first five months of the year: January, $25,000; February, $40,000; March, $30,000; April, $36,000, May
    $40,000. Experience has shown that payment for the credit sales is received as follows: 60% in the month of sale, 25% in the first month after sale, 12% in the second month after sale, and the remainder is uncollectible. How much cash can LeMinton Company expect to collect in March as a result of credit sales?
    D. $31,000.
  50. 51. The Johann's Professional Service Company expects 70% of sales for cash and 30% on credit. The company collects 80% of its credit sales in the month following sale, 15% in the second month following sale, and 5% are not collected. Expected sales for June, July, and August are $48,000, $54,000, and $44,000, respectively. What are the company's expected total cash receipts in August?
    A. $45,920.
  51. 57. Oracle Supply Co. supply forecasts purchases of 15,000 widgets in June. It sells the widget at $12.00 per unit. The company has 1,000 units on hand on June 1. The desired ending inventory of widgets on June 30 is to be 20% lower than the beginning
    inventory. Total June sales for widgets are anticipated to be (in dollars):
    C. $182,400.
  52. 59. Worton Distributing expects its September sales to be 25% higher than its August sales of $150,000.Purchases were $100,000 in August and are expected to be $120,000 in September. All sales are on credit and are expected to be collected as follows: 30% in the month of the sale and 70% in the following month. Purchases are paid 25% in the month of purchase and 75% in the following month. The beginning cash
    balance on September 1 is $10,000. The ending cash balance on September 30
    would be:
    D. $66,250.
  53. 60. Tony's Fashions
    forecasts sales of $300,000 for the quarter ended December 31.Its gross profit
    rate is 20% of sales, and its September 30 inventory is $100,000.If the
    December 31 inventory is targeted at $40,000, budgeted purchases for the
    quarter should be:
    C. $180,000.
  54. 90. Which of the following best describes the process of sales forecasting?
    A. Multiple sales forecasting tools are available.
  55. 91. ________ is a process of varying key estimates to identify those variables that are most critical to a decision (or a model, such as a budget):
    B. Sensitivity analysis
  56. 92. Assume only the specified parameters change in a sensitivity analysis. If the contribution margin increases by $2 per unit, then operating profits will:
    A. Also increase by $2 per unit.
  57. 93. Assume that only the specified parameters change in a sensitivity analysis. The contribution margin ratio increases when:
    D. Variable cost per unit decreases.
  58. 94. The process of examining how a change in a single item in a budget (e.g., sales volume) affects one or more items in the budget (e.g., budgeted sales revenue and
    budgeted operating income) is generally referred to as:
    D. What-if analysis.
  59. 95. Which of the following are alternatives to traditional budgeting approaches?


    D. Activity-based budgeting (ABB), kaizen budgeting, and zero-base budgeting (ZBB).
  60. 99. A budgeting system that has, in effect, a budget for a set number of periods (i.e., a
    constant planning horizon) at all times is called a(n):
    C. Rolling financial forecast
  61. 99. A budgeting system that has, in effect, a budget for a set number of periods (i.e., a
    constant planning horizon) at all times is called a(n):
    C. Rolling financial forecast
  62. 100. All of the following represent alternative approaches to the traditional budget-preparation process except which one?
    A. Master budgeting

  63. 101.Which one of the following is not a way to deal with uncertainty in the budget-preparation process?
    A. Linear programming.
  64. 102. The proper treatment of the cost of unused capacity, as identified through the use of an activity-based budgeting (ABB) system, is:
    E. To charge the amount to the product line, department, or a given manager within the organization where the decision to acquire the capacity was made.
  65. The type of compensation plan that focuses on the difference between actual performance (sales, operating income, etc.) and budgeted performance is refers to:
    D. The use of a fixed-performance contract.
  66. 104. The act of encouraging non-value-adding actions on the part of management in order
    to improve indicated performance is referred to as:
    B. Gaming the performance indicator.
  67. 105. The practice of managers knowingly including a higher amount of expenditures (or lower amount of revenue) in the budget than they actually believe will occur is called:
    D. Budgetary slack.
  68. 106. Which of the following is NOT true regarding the use of linear compensation plans?
    B. Such plans strongly link managerial compensation to the agreed-upon budget.
  69. 107. Which of the following is NOT a characteristic of Kaizen Budgeting?
    D. The approach can be used internally, but not for external purposes (e.g., in budgeting supplier costs).

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