One of the advantages of a self-imposed budget is that the person directly involved in an activity is more likely to be in a position to make good budget estimates.

1. The sales budget is usually prepared before the production budget.

Level: Easy    LO:  1,2,3    Ans:  T

2. The cash budget is the starting point in preparing the master budget.

Level: Medium    LO:  1,8    Ans:  F

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

Level: Medium    LO:  1    Ans:  F

4. One of the weaknesses of budgets is that they are of little value in uncovering potential bottlenecks in an organization.

Level: Medium    LO:  1    Ans:  F

5. One of the advantages of a self-imposed budget is that the person directly involved in an activity is more likely to be in a position to make good budget estimates.

Level: Easy    LO:  1    Ans:  T

6. The basic idea behind responsibility accounting is that top management is responsible for preparing detailed budgets by which the performance of middle and lower management will be evaluated.

Level: Easy    LO:  1    Ans:  F

7. Budgeting is a trade-off between planning and control in that increased use of budgeting will usually improve planning but will weaken control.

Level: Medium    LO:  1    Ans:  F

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

Level: Easy    LO:  2    Ans:  T

9. Uncollectible amounts on credit sales to customers will be listed as cash outflows on the schedule of expected cash collections.

Level: Medium    LO:  2    Ans:  F

10. The number of units to be produced in a period can be determined by adding the expected sales to the desired ending inventory and then deducting the beginning inventory.

Level: Medium    LO:  3    Ans:  T

11. When preparing a direct materials budget, beginning inventory for raw materials should be added to production needs, and desired ending inventory should be subtracted to determine the amount of raw materials to be purchased.

Level: Medium    LO:  4    Ans:  F

12. The manufacturing overhead budget provides a schedule of all costs of production other than direct materials and direct labor.

Level: Easy    LO:  6    Ans:  T

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

Level: Medium    LO:  7    Ans:  F

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

Level: Easy    LO:  8    Ans:  T

15. In zero-base budgeting, only changes from the prior budget must be justified.

Level: Easy    LO:  11    Ans:  F