ch07 - CHAPTER 7 OPERATING BUDGETS: BRIDGING PLANNING AND...

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Unformatted text preview: CHAPTER 7 OPERATING BUDGETS: BRIDGING PLANNING AND CONTROL TRUE/FALSE 1. Multi-year budgets are strategic plans that specify the direction in which a company desires to head. LO1 True 2. Strategic budgets bridge short-term decisions and long-term plans. LO1 False Operating budgets bridge short-term decisions and long-term plans. 3. Financial budgets quantify the outcomes of operating budgets in summary financial statements. LO1 True 4. In a centralized decision-making environment, the manager delegates decision making to individuals with relevant experience and knowledge. LO1 False In a decentralized decision-making environment, the manager delegates decision making to individuals with relevant experience and knowledge. 5. Many firms use cross-functional teams that include employees from several departments to prepare the budget. LO1 True 6. The first step in preparing a master budget is to prepare the revenue budget. LO2 True 7. Little time is spent in preparing the revenue budget, as its accuracy is not as crucial as budgets involving costs. LO2 False Firms spend considerable time and effort in preparing a revenue budget, as its accuracy is crucial in putting together a good master budget. 8. The production budget combines the demand information provided by the revenue budget and the companys inventory policy regarding finished goods to determine production levels in the coming period. LO2 True 7-1 9. The purchasing and production managers coordinate closely to prepare the materials usage budget because it requires both price and quantity estimates. LO2 True 10. The variable cost of goods manufactured is the sum of several cost items: material, labor, variable overhead, and variable selling and administrative expenses. LO2 False The variable cost of goods manufactured is the sum of several cost items: materials, labor, and variable overhead. 11. Effective working capital management can save companies money in terms of interest payments on costly short-term loans. LO3 True 7-2 Operating Budgets: Bridging Planning and Control 12. In preparing a cash budget, from an accounting record-keeping perspective there is no need to adjust the balance of accounts receivable and reported income to reflect the uncollectible debt. LO3 False From an accounting record-keeping perspective, we need to adjust the balance of accounts receivable and reported income to reflect the uncollectible debt....
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ch07 - CHAPTER 7 OPERATING BUDGETS: BRIDGING PLANNING AND...

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