PQ1 C20 True-False 1. When managers plan, they use budget information to review variances that suggest waste in operating activities. 2. During the year, managers use budget information to communicate expectations about performance, to measure performance and motivate employees, and to coordinate activities and allot resources.
3. A budget is a plan of action that reflects historical transactions, activities, and events in financial terms. 4. Performance reports are used to compare actual operating results with planned results. 5. A service organization does not have a direct materials budget. 6. Successful budget implementation depends on clear communication of performance expectations and budget targets, and on the support of top management 7. Participative budgeting is a process in which personnel at all levels of an organization actively engage in making decisions about the budget. Multiple Choice 8. Which of the following is true of a successful budgeting process? A. Top management shows little interest in the results of the budget process. B. Only accounting personnel should be involved. C. Performance measures should be identified before the organizations strategies and goals are established. D. Before annual operating budgets can be developed, top management must communicate the organizations long-term goals to those who prepare the budgets. E. All of the above are true. 9. A retail organizations operating budgets typically include all of the following except a A. sales budget. B. production budget. C. purchases budget. D. selling and administrative expense budget. E. cost of goods sold budget. 10. To improve the quality of budgets, the managers who prepare them need to know A. why the budget is being prepared. B. who will use it. C. where accurate budget information can be found. D. how the information be should presented. E. all of the above. 11. All of the following budgets typically include units as well as dollars except the A. sales budget. B. selling and administrative expense budget. C. production budget. D. direct materials purchases budget. E. none of the above. 12. In developing a master budget, the last item prepared is the A. budgeted balance sheet. B. budgeted income statement. C. capital expenditures budget. D. cash budget. E. none of the above. 13. In developing a master budget, the first item prepared is the A. cash budget. B. production budget. C. sales budget. D. direct materials purchases budget. E. none of the above. 14. How does budgeting in a just-in-time operating environment differ from budgeting in a traditional manufacturing environment? A. Different operating budgets are required. B. Budgets are updated more frequently. C. Budgets are updated less frequently. D. The same budget schedules are prepared, but in a different sequence.
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E. None of the above The purpose of a budget is to A. provide a basis for performance measurement and evaluation. B. provide a forecast of the results of operations. C. provide a means of communicating key goals and objectives throughout the organization. D. all of the above. E. none of the above. If management wants finished goods inventory to decrease over an accounting period, which of the following best describes the relationship between units sold and units produced? A. They are equal. B. Units sold are greater than units produced. C Units sold are less than units produced. D. It cannot be determined without further information. E. Units sold are proportionally greater than units produced.
ANSWERS TO REVIEW QUIZ True-False 1. F 2. 3. 4. 5. 6. 7. T F T T T T
Multiple Choice 8. d 9. 10. 11. 12. 13. 14. 15 16. b e b a c b d b