The
usual starting point in budgeting is to make a forecast of net income.
Ans: False
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1,9 Level: Easy
2. A
budget committee helps provide consistency in the budgeting process because it
prepares all of the budgets for the various segments of the organization.
Ans: False
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
3. A
continuous or perpetual budget is one which covers a 12-month period but which
is constantly adding a new month on the end as the current month is completed.
Ans: True
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
4. Control
involves developing objectives and preparing the various budgets to achieve
those objectives.
Ans: False
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
5. A
self-imposed budget is one prepared by top management and passed downward
through an organization.
Ans: False
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
6. When
using the self-imposed budget approach, it is generally best for top management
to accept all budget estimates without question in order to minimize adverse
behavioral responses from employees.
Ans: False
AACSB: Reflective Thinking
AICPA BB: Resource Management, Critical Thinking AICPA FN: Reporting LO: 1 Level: Easy
7. Cash
collections in a schedule of cash collections typically consist of collections
on sales made to customers in prior periods plus collections on sales made in
the current budget period.
Ans: True
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 2 Level: Easy
8. In
a production budget, if the number of units in finished goods inventory at the
end of the period is less than the number of units in finished goods inventory
at the beginning of the period, then the expected number of units sold is
greater than the number of units to be produced during the period.
Ans: True
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Medium
9. In
a merchandising company, the required merchandise purchases for a period are
determined by subtracting the units in beginning inventory from the sum of the
units to be sold during the period and the desired ending inventory.
Ans: True
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 3 Level: Easy
10. The
direct materials to be purchased for a period can be obtained by subtracting
the desired ending inventory of direct materials from the total direct
materials needed for the period.
Ans: False
AACSB: Reflective Thinking AICPA BB: Critical Thinking AICPA FN: Reporting LO: 4 Level: Medium
11. The
direct labor budget begins with sales in units from the sales budget.
Ans: False
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 5 Level: Easy
12. The
selling and administrative expense budget lists all costs of production other
than direct materials and direct labor.
Ans: False
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6,7 Level: Easy
13. In
the manufacturing overhead budget, the non-cash charges (such as depreciation)
are deducted from the total budgeted manufacturing overhead to determine the
expected cash disbursements for manufacturing overhead.
Ans: True
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 6 Level: Easy
14. The
selling and administrative expense budget lists the budgeted expenses for areas
other than manufacturing.
Ans: True
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 7 Level: Easy
15. The
disbursements section of a cash budget consists of all cash payments for the
period except cash payments for dividends.
Ans: False
AACSB: Reflective Thinking
AICPA BB: Critical Thinking AICPA FN: Reporting LO: 8 Level: Medium
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