Question 1

Long-run planning and short-run planning are best performed independently of each other.

Accepted Answer

A) True 
 B)False

Question 2

Answer the following questions using the information below:
Furniture, Inc., estimates the following number of mattress sales for the first four months of 2016:
 $$\begin{array} { l l } 
\text { Month } & \text { Sales } \
\text { January } & 22,000 \
\text { February } & 30,800 \
\text { March } & 28,600 \
\text { April } & 35,200
\end{array}$$ Finished goods inventory at the end of December is 6,600 units. Target ending finished goods inventory is 20% of the next month's sales.
-How many mattresses should be produced in the first quarter of 2016?

Accepted Answer

A)  88,880 mattresses 
B)  81,840 mattresses 
C)  60,280 mattresses 
D)  51,920 mattresses

Question 3

Managers who feel that top management does not believe in the budget are most likely to ________.

Accepted Answer

A)  pick up the slack and participate in the budgeting process 
B)  to face little interference in the day-to-day aspects of running the business 
C)  be inactive participants in the budgeting process 
D)  convert the budget to a shorter more reasonable time period

Question 4

Orange Corporation has budgeted sales of 16,000 units,targeted ending finished goods inventory of 4,000 units,and beginning finished goods inventory of 2,000 units.How many units should be produced next year?

Accepted Answer

A)  22,000 units 
B)  20,000 units 
C)  18,000 units 
D)  16,000 units

Question 5

Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm's performance relative to its budgets?

Accepted Answer

A)  Evaluations based on budgets can be meaningless due to factors such as exchange rate risk and other volatility. 
B)  Evaluations based on budgets are not possible because of cultural differences in the budgeting approach. 
C)  Evaluations based on relative regional performance are considered more meaningful as compared to evaluations against budgets. 
D)  Evaluations based on budgets are harder when managers use sophisticated techniques to minimize foreign currency exposure.

Question 6

The revenues budget should be based on the cost of goods sold budget.

Accepted Answer

A) True 
 B)False

Question 7

Answer the following questions using the information below:
The following information pertains to the January operating budget for Casey Corporation.
• Budgeted sales for January $200,000 and February $100,000.
• Collections for sales are 60% in the month of sale and 40% the next month.
• Gross margin is 30% of sales.
• Administrative costs are $10,000 each month.
• Beginning accounts receivable is $20,000.
• Beginning inventory is $14,000.
• Beginning accounts payable is $65,000. (All from inventory purchases.)
• Purchases are paid in full the following month.
• Desired ending inventory is 20% of next month's cost of goods sold (COGS).
-For January,budgeted cash payments for purchases are ________.

Accepted Answer

A)  $100,000 
B)  $70,000 
C)  $65,000 
D)  $50,000

Question 8

Demanding but achievable targets tend to ________.

Accepted Answer

A)  be set by subordinate managers to create intrinsic reasons to achieve targets 
B)  create unnecessary anxiety that de-motivates employees 
C)  improve performance of employees when they are closer to the target 
D)  be perceived as ambitious with little chance of success in achieving targets

Question 9

Costs such as supervision,depreciation,maintenance,supplies,and power.are included in the ________.

Accepted Answer

A)  capital expenditures budget 
B)  distribution costs budget 
C)  revenues budget 
D)  manufacturing overhead budget

Question 10

Financial planning software packages assist management with ________.

Accepted Answer

A)  assigning responsibility to various levels of management 
B)  identifying the target customer 
C)  sensitivity analysis in their planning and budgeting activities 
D)  achieving greater commitment from lower management

Question 11

Administration of budgets is free of emotions as budgets are mechanical tools.

Accepted Answer

A) True 
 B)False

Question 12

Answer the following questions using the information below:
The following information pertains to the January operating budget for Casey Corporation.
• Budgeted sales for January $200,000 and February $100,000.
• Collections for sales are 60% in the month of sale and 40% the next month.
• Gross margin is 30% of sales.
• Administrative costs are $10,000 each month.
• Beginning accounts receivable is $20,000.
• Beginning inventory is $14,000.
• Beginning accounts payable is $65,000. (All from inventory purchases.)
• Purchases are paid in full the following month.
• Desired ending inventory is 20% of next month's cost of goods sold (COGS).
-For January,budgeted cash collections are ________.

Accepted Answer

A)  $200,000 
B)  $140,000 
C)  $120,000 
D)  $20,000

Question 13

Total finished units to be produced is based on the ________.

Accepted Answer

A)  direct material purchase budget 
B)  budgeted sales units 
C)  direct material usage budget 
D)  budgeted manufacturing overhead

Question 14

A maintenance manager of a theatre is most likely to be responsible for a(n)________.

Accepted Answer

A)  revenue center 
B)  investment center 
C)  cost center 
D)  profit center

Question 15

Activity-based budgeting ________.

Accepted Answer

A)  uses one cost driver such as direct labor-hours 
B)  uses only output-based cost drivers such as units sold 
C)  focuses on activities necessary to produce and sell products and services 
D)  classifies costs by functional area within the value chain

Question 16

Which of the following best describes a rolling budget?

Accepted Answer

A)  It is a budget that outlines the amount required to roll over debt in a future period. 
B)  It is a budget that is always available for a specified future time period. 
C)  It is a budget that outlines budgeted expenses. 
D)  It is a budget that is submitted to a bank at the beginning of every month as per a loan covenant.

Question 17

Responsibility accounting ________.

Accepted Answer

A)  emphasizes controllability 
B)  focuses on who should be asked about the information 
C)  attempts to assign blame for problems to a specific manager 
D)  attempts to create a decentralized organization

Question 18

Explain what is meant by sensitivity analysis in budgeting,and discuss how managers might use sensitivity analysis in practice.

Accepted Answer

The answer of Explain what is meant by sensitivity analysis...

Question 19

Prescher Company sells three products with the following seasonal sales pattern:
 $$\begin{array}{l}

\begin{array} { c c c c } &\text { Products }\
\text { Quarter } & \text { A } & \text { B } & \text { C } \
1 & 40 \% & 30 \% & 10 \% \
2 & 30 \% & 20 \% & 30 \% \
3 & 20 \% & 20 \% & 50 \% \
4 & 10 \% & 30 \% & 10 \%
\end{array}
\end{array}$$ The annual sales budget shows forecasts for the different products and their expected selling price per unit to be as follows:
 $$\begin{array} { c c c } 
\text { Product } & \text { Units } & \text { Selling Price } \
\hline \text { A } & 50,000 & \$ 16 \
\text { B } & 125,000 & 40 \
\text { C } & 62,500 & 24
\end{array}$$ Required:
Prepare a sales budget,in units and dollars,by quarters for the company for the coming year.

Accepted Answer

The answer of Prescher Company sells three products with the...

Question 20

Financial analysts use the projected cash flow statement to ________.

Accepted Answer

A)  determine the tax effect of cash expenses 
B)  plan for short-term cash investments 
C)  analyze the impact of non-cash expense on income statement 
D)  project depreciation expense

Exam 6: Master Budget and Responsibility Accounting

Long-run planning and short-run planning are best performed independently of each other.

Managers who feel that top management does not believe in the budget are most likely to ________.

Orange Corporation has budgeted sales of 16,000 units,targeted ending finished goods inventory of 4,000 units,and beginning finished goods inventory of 2,000 units.How many units should be produced next year?

Which of the following is a reason why budgets in multinational companies are not used to evaluate the firm's performance relative to its budgets?

The revenues budget should be based on the cost of goods sold budget.

Demanding but achievable targets tend to ________.

Costs such as supervision,depreciation,maintenance,supplies,and power.are included in the ________.

Financial planning software packages assist management with ________.

Administration of budgets is free of emotions as budgets are mechanical tools.

Total finished units to be produced is based on the ________.

A maintenance manager of a theatre is most likely to be responsible for a(n) ________.

Activity-based budgeting ________.

Which of the following best describes a rolling budget?

Responsibility accounting ________.

Explain what is meant by sensitivity analysis in budgeting,and discuss how managers might use sensitivity analysis in practice.

Financial analysts use the projected cash flow statement to ________.