Question 1

Select the incorrect statement about the planning process.

Accepted Answer

A)  The longer the time period,the more specific the plans. 
B)  Planning decisions can often be sub-divided into three distinct planning phases,short-term,intermediate-term,and long-term. 
C)  The nature of planning changes with the length of the time period being considered. 
D)  The shorter the time period,the less general the plans. 
A)  The longer the time period,the more specific the plans. 
B)  Planning decisions can often be sub-divided into three distinct planning phases,short-term,intermediate-term,and long-term. 
C)  The nature of planning changes with the length of the time period being considered. 
D)  The shorter the time period,the less general the plans.

Question 2

The budgeting process that involves adding a month to the end of the budget period at the end of each month,thus maintaining a twelve-month planning horizon,is referred to as:

Accepted Answer

A)  participative budgeting. 
B)  capital budgeting. 
C)  continuous budgeting. 
D)  zero-based budgeting. 
A)  participative budgeting. 
B)  capital budgeting. 
C)  continuous budgeting. 
D)  zero-based budgeting.

Question 3

The nature of planning changes with the length of the time period being considered.Generally,the shorter the time period,the more general the plans.

Accepted Answer

A) True 
 B)False

Question 4

The pro forma income statement gives managers an advance estimate of a company's profitability.

Accepted Answer

A) True 
 B)False

Question 5

Dobson Company expects to begin operating on January 1.The company's master budget contained the following operating expense budget: $$\begin{array} { | l | r | r | r | } 
\hline &  { \text { January } } & \text { February } &  { \text { March } } \
\hline \text { Salary expense } & \$ 40,000 & \$ 36,000 & \$ 36,000 \
\hline \text { Sales commissions, } 5 \% \text { of sales } & 24,000 & 30,000 & 28,000 \
\hline \text { Utilities } & 2,800 & 2,800 & 2,800 \
\hline \text { Depreciation on store equipment } & 1,800 & 1,800 & 1,800 \
\hline \text { Rent } & 7,200 & 7,200 & 7,200 \
\hline \text { Miscellane ous } & 1,800 & 1,800 & 1,800 \
\hline \text { Total operating expenses } & \$ 77,600 & \$ \quad 79,600 & 
 \$ 77,600 \
\hline
\end{array}$$ Sales commissions are paid in cash in the month following the month in which the expense is recognized.All other expense items requiring cash payment are paid in the month in which they are recognized.The amount of cash to be paid for operating expenses during the month of January is:

Accepted Answer

A)  $53,600. 
B)  $51,800. 
C)  $77,600. 
D)  None of the above. 
A)  $53,600. 
B)  $51,800. 
C)  $77,600. 
D)  None of the above.

Question 6

What is the role of top management in a participative budgeting system?

Accepted Answer

A)  Top management has no role - the budget is entirely developed by the lower-level employees. 
B)  Top management must always tighten employee-set budget standards to eliminate employees' attempts to build slack into the standards. 
C)  Top management must ensure that employee-generated objectives are consistent with those of the company. 
D)  All of the answers are correct. 
A)  Top management has no role - the budget is entirely developed by the lower-level employees. 
B)  Top management must always tighten employee-set budget standards to eliminate employees' attempts to build slack into the standards. 
C)  Top management must ensure that employee-generated objectives are consistent with those of the company. 
D)  All of the answers are correct.

Question 7

Which of the following accounts would appear on the sales budget and the pro forma income statement?

Accepted Answer

A)  Selling and administrative expenses 
B)  Sales revenue 
C)  Accounts receivable 
D)  Both B and C are correct 
A)  Selling and administrative expenses 
B)  Sales revenue 
C)  Accounts receivable 
D)  Both B and C are correct

Question 8

What is the amount of ending inventory that the company will report on its pro forma balance sheet?

Accepted Answer

A)  $7,500 
B)  $10,500 
C)  $35,300 
D)  $60,500 
A)  $7,500 
B)  $10,500 
C)  $35,300 
D)  $60,500

Question 9

Which of the following statements is

Accepted Answer

A)  Participative budgeting means that a company's budget should be prepared by lower-level employees. 
B)  The attitudes and actions of upper-level management have little impact on the effectiveness of a company's budget. 
C)  Employees often find that budgets are constraining and limiting. 
D)  In preparing a budget,information flows occur only from the bottom up. 
A)  Participative budgeting means that a company's budget should be prepared by lower-level employees. 
B)  The attitudes and actions of upper-level management have little impact on the effectiveness of a company's budget. 
C)  Employees often find that budgets are constraining and limiting. 
D)  In preparing a budget,information flows occur only from the bottom up.

Question 10

Select the incorrect statement regarding the human factor in the budgeting process.

Accepted Answer

A)  Budgets force employees to follow the organization's plan. 
B)  The evaluation feature of budget systems is frightening for many people. 
C)  There is a tendency for people to be uncomfortable with budgets. 
D)  Proper handling of human relations is essential to the establishment of an effective budget system. 
A)  Budgets force employees to follow the organization's plan. 
B)  The evaluation feature of budget systems is frightening for many people. 
C)  There is a tendency for people to be uncomfortable with budgets. 
D)  Proper handling of human relations is essential to the establishment of an effective budget system.

Question 11

Which of the following budgets needs to be prepared prior to preparing an inventory purchases budget?

Accepted Answer

A)  Selling and administrative expense budget 
B)  Sales budget 
C)  Cash budget 
D)  All of the answers are correct. 
A)  Selling and administrative expense budget 
B)  Sales budget 
C)  Cash budget 
D)  All of the answers are correct.

Question 12

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual.Which advantage of budgeting would have helped him identify this problem sooner?

Accepted Answer

A)  Performance measurement 
B)  Coordination 
C)  Planning 
D)  Corrective action 
A)  Performance measurement 
B)  Coordination 
C)  Planning 
D)  Corrective action

Question 13

Compton Company expects the following total sales: $\begin{array}{|l|c|}
\hline \text { Month } & \text { Sales } \
\hline \text { March } & \$ 30,000 \
\hline \text { April } & \$ 20,000 \
\hline \text { May } & \$ 30,000 \
\hline \text { June } & \$ 25,000 \
\hline
\end{array}$ The company expects 60% of its sales to be credit sales and 40% for cash.Credit sales are collected as follows: 30% in the month of sale,70% in the month following the sale.The budgeted accounts receivable balance on May 31 is:

Accepted Answer

A)  $12,240. 
B)  $12,600. 
C)  $20,400. 
D)  $21,000. 
A)  $12,240. 
B)  $12,600. 
C)  $20,400. 
D)  $21,000.

Question 14

How much will the cash payments for purchases be in November?

Accepted Answer

A)  $35,500 
B)  $34,500 
C)  $40,000 
D)  $36,000 
A)  $35,500 
B)  $34,500 
C)  $40,000 
D)  $36,000

Question 15

Oakton Furniture provided the following information relevant to its sales for December Year 1 and the first quarter of Year 2 $\begin{array}{|l|l|r|r|r|}
\hline&  \text { Dec. Year } 1 &\text { Jan. Year } 2 &\text { Feb. Year } 2 & \text { Mar. Year } 2 \
\hline & \text { (Actual)} & \text { (Budgeted)  }& \text { (Budgeted)  }& \text { (Budgeted)  } \
\hline \text {Credit sales } &\$ 120,000 & \$  280,000 & \$ 310,000 & \$ 220,000 \
\hline \text {    Cash sales } &\$ 20,000 & \$  50,000 & \$  60,000 & \$  24,000 \
\hline
\end{array}$ Based on the company's collection history,42% of credit sales are collected in month of sale and the remainder is collected in the following month.Cash collections in January from December credit sales would be:

Accepted Answer

A)  $69,600. 
B)  $81,200. 
C)  $72,000. 
D)  $84,000. 
A)  $69,600. 
B)  $81,200. 
C)  $72,000. 
D)  $84,000.

Question 16

The master budget includes several individual budgets,which are interdependent.Provide at least two examples of connections (relationships)between budgets.

Accepted Answer

Answers will vary
There are several conn

Question 17

Four purposes or advantages for budgeting involve planning,coordination,performance measurement,and punitive action.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

Accepted Answer

A)  Depreciation expense 
B)  Administrative salaries 
C)  Advertising expense 
D)  Both administrative salaries and advertising expense are correct. 
A)  Depreciation expense 
B)  Administrative salaries 
C)  Advertising expense 
D)  Both administrative salaries and advertising expense are correct.

Question 19

Benton Company's sales budget shows the following expected total sales: $\begin{array}{|l|c|}
\hline {\text { Month }} & \text { Sales } \
\hline \text { January } & \$ 25,000 \
\hline \text { February } & \$ 30,000 \
\hline \text { March } & \$ 35,000 \
\hline \text { Apnil } & \$ 40,000 \
\hline
\end{array}$ The company expects 80% of its sales to be on account (credit sales).Credit sales are collected as follows: 25% in the month of sale,72% in the month following the sale with the remainder being uncollectible and written off.The total cash receipts during April would be:

Accepted Answer

A)  $16,000. 
B)  $28,160. 
C)  $24,640. 
D)  $36,160. 
A)  $16,000. 
B)  $28,160. 
C)  $24,640. 
D)  $36,160.

Question 20

The master budget normally covers:

Accepted Answer

A)  Three months. 
B)  1 year. 
C)  1-5 years. 
D)  5-10 years. 
A)  Three months. 
B)  1 year. 
C)  1-5 years. 
D)  5-10 years.

Select the incorrect statement about the planning process.

The budgeting process that involves adding a month to the end of the budget period at the end of each month,thus maintaining a twelve-month planning horizon,is referred to as:

The nature of planning changes with the length of the time period being considered.Generally,the shorter the time period,the more general the plans.

The pro forma income statement gives managers an advance estimate of a company's profitability.

What is the role of top management in a participative budgeting system?

Which of the following accounts would appear on the sales budget and the pro forma income statement?

What is the amount of ending inventory that the company will report on its pro forma balance sheet?

Which of the following statements is

Select the incorrect statement regarding the human factor in the budgeting process.

Which of the following budgets needs to be prepared prior to preparing an inventory purchases budget?

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual.Which advantage of budgeting would have helped him identify this problem sooner?

How much will the cash payments for purchases be in November?

The master budget includes several individual budgets,which are interdependent.Provide at least two examples of connections (relationships)between budgets.

Four purposes or advantages for budgeting involve planning,coordination,performance measurement,and punitive action.

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

The master budget normally covers:

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 7: Planning for Profit and Cost Control

Select the incorrect statement about the planning process.

The budgeting process that involves adding a month to the end of the budget period at the end of each month,thus maintaining a twelve-month planning horizon,is referred to as:

The nature of planning changes with the length of the time period being considered.Generally,the shorter the time period,the more general the plans.

The pro forma income statement gives managers an advance estimate of a company's profitability.

What is the role of top management in a participative budgeting system?

Which of the following accounts would appear on the sales budget and the pro forma income statement?

What is the amount of ending inventory that the company will report on its pro forma balance sheet?

Which of the following statements is

Select the incorrect statement regarding the human factor in the budgeting process.

Which of the following budgets needs to be prepared prior to preparing an inventory purchases budget?

Jason had been operating his machine for an entire month before he realized that it was generating more scrap than usual.Which advantage of budgeting would have helped him identify this problem sooner?

How much will the cash payments for purchases be in November?

The master budget includes several individual budgets,which are interdependent.Provide at least two examples of connections (relationships)between budgets.

Four purposes or advantages for budgeting involve planning,coordination,performance measurement,and punitive action.

Which of the following items typically found on the selling and administrative expense budget will also impact the cash budget?

The master budget normally covers:

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters