Chp 8 – Flashcards

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. True False

Budgets are used to plan and to control operations. True False

The sales budget is usually prepared before the production budget. True False

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

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

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

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

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

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

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

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

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. True False

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. True False

The manufacturing overhead budget lists all costs of production other than selling and administrative expenses. True False

Only variable manufacturing overhead costs are included in the manufacturing overhead budget. True False

Both variable and fixed manufacturing overhead costs are included in the selling and administrative expense budget. True False

The direct labor budget shows the direct labor-hours required to produce the desired ending inventory. True False

On a cash budget, the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment. True False

Which of the following is NOT an objective of the budgeting process? A. To communicate management's plans throughout the entire organization. B. To provide a means of allocating resources to those parts of the organization where they can be used most effectively. C. To ensure that the company continues to grow. D. To uncover potential bottlenecks before they occur.

When preparing a production budget, the required production equals: A. Budgeted sales + beginning inventory + desired ending inventory. B. Budgeted sales - beginning inventory + desired ending inventory. C. Budgeted sales - beginning inventory - desired ending inventory. D. Budgeted sales + beginning inventory - desired ending inventory.

All the following are considered to be benefits of participative budgeting, except for: A. Individuals at all organizational levels are recognized as being part of a team; this results in greater support for the organization. B. The budget estimates are prepared by those in directly involved in activities. C. When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations. D. Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals set by others.

The budget method that maintains a constant twelve-month planning horizon by adding a new month on the end as the current month is completed is called: A. An operating budget. B. A capital budget. C. A continuous budget. D. A master budget.

The direct labor budget is based on: A. The desired ending inventory of finished goods. B. The beginning inventory of finished goods. C. The required production for the period. D. The required materials purchases for the period.