question

1. Which of the following are correct statements regarding budgets? a. It is a formal written statement of management's plans for a specified future time b. It becomes an important basis for evaluating performance c. It promotes efficiency and serves as a deterrent to waste a inefficiency d. All the above

answer

D

question

1. The primary benefits of budgeting include all of the following except: a. Creates an early warning system for potential problems b. Motivates personnel throughout the organization c. Requires only top management to plan ahead and formalize goals d. Provides definite objectives for evaluating performance

answer

C

question

1. The direct labor budget and manufacturing overhead budget are prepared directly from the: a. Sales budget b. Production budget c. Cash budget d. Budgeted income statement

answer

A

question

1. The budgeted income statement is: a. The end product of the operating budgets. b. Dependent on cash receipts and cash disbursements. c. The end product of the financial budgets. d. The starting point of the master budget

answer

A

question

1. What is the starting point in preparing the master budget/operating budget? a. The financial budget b. The Income statement c. Production budget Sales budget

answer

D

question

1. A purchasing manager would most likely create a budget with budgetary slack by: a. Over estimating costs b. Under estimating costs c. Over estimating revenues d. Under estimating revenues

answer

A

question

1. Budgetary control involves: a. Developing the budget b. Analyzing the difference between actual and budgeted amounts c. Taking corrective action d. All the above

answer

D

question

1. Management by exception means that top management will investigate every budget difference a. True b. False

answer

B

question

1. The only time exceeding a budget is favorable is when: a. You have written approval from management b. You are dealing with a sales budget c. You are not the manager d. All the above

answer

B

question

1. What are 3 types of responsibility centers and an example of each?

answer

cost investment and profit

question

1. Under responsibility accounting, the evaluation of a manager's performance is based on matters that the manager: a. Has shared responsibility for with another manager b. Indirectly controls c. Directly controls d. Directly and indirectly controls

answer

C

question

1. A manager of an investment center can improve ROI by: a. Increasing sales b. Reducing variable and/or controllable fixed costs c. Decreasing average operating assets d. All the above

answer

D

question

1. Standards differ from budgets in that: a. Only budgets contribute to management planning and control. b. Budgets are a total amount and standards are a unit amount. c. Budgets but not standards may be journalized and posted. d. Budgets but not standards may be used in valuing inventories.

answer

B

question

1. The advantages of standard costs include all of the following except: a. Management must use a static budget b. They may simplify the costing of inventories c. Management planning is facilitated d. Management by excepting may be used

answer

A

question

1. Normal standards: a. Are rarely used because managers believe they lower workforce moral b. Represent levels of performance under perfect operating conditions c. Allow for rest periods, machine breakdowns, and set up time d. Are more likely than ideal standards to result in unethical practices

answer

C

question

1. In using variance reports to evaluate cost control, management normally looks into: a. Unfavorable variances only. b. Both favorable and unfavorable variances that exceed the predetermined quantitative measures (i.e.: percentage or $$$ amount) c. Favorable variances only. d. All variances.

answer

B

question

1. The overhead controllable variance is the difference between: a. Budgeted overhead and applied overhead b. Actual overhead and applied overhead c. Actual overhead and budgeted overhead d. None of these options

answer

B

question

1. Which of the following is not a result of ideal standards: a. Unethical practices b. Are rigorous but attainable c. Represent levels of performance under perfect operating condition d. Are rarely used because managers believe they lower workforce morale

answer

B

question

1. What is a weakness of the cash payback technique? a. It ignores the useful life of alternative projects b. It ignores the time value of money c. It uses accrual based accounting numbers d. Both (b) and (c) are correct

answer

D

question

1. Cash outflows include sale of old equipment? a. True b. False

answer

B

question

1. project should be accepted it its internal rate of return exceeds: a. Zero b. The return rate on a government bond c. The company's required rate of return d. The rate the company pays on borrowed funds

answer

C

question

1. Which of the following is not an alternative name for the discount rate? a. Reduction rate b. Required rate of return c. Hurdle rate d. Cutoff rate

answer

A

question

1. Which of the following is incorrect about the annual rate of return technique? a. The calculation is simple b. The accounting terms used are familiar to management c. The timing of the cash inflows is not considered d. The time value of money is considered

answer

D

question

1. The profitability index used to compare alternative projects is computed by dividing the: a. Cash flows by the et present value b. Cash flows by the initial investment c. Present value of net cash flows by the initial investment d. Present value of net cash flows by the net present value

answer

C

question

1. Which of the following is not an example of a capital budgeting decision? a. Decision to build a new plant b. Decision to buy a piece of machinery c. Decision to renovate an existing facility d. All the above are capital budgeting decision

answer

D

question

1. When calculating an investment's NPV, which table is used when the annual CF's are even, or equal? a. Present value of an annuity table b. Future value of $1 table c. Present Value of $1 table d. Future value of an annuity table

answer

A

question

Each of the other budgets in the master budget depends on the: A. sales budget b. budgeted income statement c. cash budget d. production budget

answer

A

question

A sales budget is a. managements best estimate of sales revenue for the year b. not the starting point for the master budget c. derived from the production budget d. prepared only for credit sales

answer

A

question

T/F the budget is developed within the framework of a sales forecast

answer

T

question

Which one of the following budgets is considered to be the most important financial budget? a. budgeted income statement b. budgeted balance sheet c. sales budget d. cash budget

answer

D

question

T/F Budgetary slack is more likely to occur when an organization uses a "top down" approach to develop its budgets.

answer

F

question

T/F The budget is developed within the framework of a sales forecast.

answer

T

question

T/F A production budget should be prepared before the sales budget.

answer

F

question

T/F The master budget reflects management's long-term plans encompassing five years or more.

answer

F

question

T/F The direct materials budget must be completed before the production budget because the quantity of materials available for production must be known.

answer

F

question

For which of the following costs is a static budget most appropriate? a. actual costs b. variable costs c. fixed overhead costs d. uncontrollable costs

answer

C

question

T/F A flexible budget report will show both actual and budget cost based on the actual activity level achieved.

answer

T

question

T/F Cost centers, profit centers, and investment centers can all be classified as responsibility centers.

answer

T

question

T/F A cost center incurs costs and generates revenues and cost center managers are evaluated on the profitability of their centers.

answer

F

question

T/F Most direct fixed costs are not controllable by the profit center manager.

answer

F

question

T/F Management by exception means that management will investigate areas where actual results differ from planned results if the items are material and controllable.

answer

T

question

T/F The cash payback technique is a quick way to calculate a project's net present value.

answer

F

question

T/F The cost of capital is a weighted average of the rates paid on borrowed funds, as well as on funds provided by investors in the company's stock.

answer

T

question

T/F The profitability index allows comparison of the relative desirability of projects that require differing initial investments.

answer

T

question

T/F Using the internal rate of return method, a project is rejected when the rate of return is greater than or equal to the required rate of return.

answer

F

question

T/F A major advantage of the annual rate of return method is that it considers the time value of money.

answer

F

question

What is the difference between a budget and a standard? a. there is no difference b. a budget is a total amount while a standard expresses a unit amount c. a budget is the amount planned while a standard reflects the actual results d. managers pay more attention to budgets rather than standards

answer

B

question

What kind of standard is normally set by management? a. ideal b. undemanding c. rigorous but attainable d. sophisticated

answer

C

question

Who is usually responsible for the materials price variance? a. production manager b. HR manager c. cost accounting manager d. purchasing manager

answer

D

question

T/F Setting standard costs is relatively simple because it is done entirely by accountants.

answer

F

question

T/F Ideal standards will generally result in favorable variances for the company.

answer

F

question

T/F If actual costs are less than standard costs, the variance is favorable.

answer

T

question

T/F The materials price variance is normally caused by the production department.

answer

F

question

T/F In using variance reports, top management normally looks carefully at every variance.

answer

F

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