Chapter 6 test bank

Chapter 6 Test Bank
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CHAPTER 6 MASTER BUDGET AND RESPONSIBILITY ACCOUNTING TRUE/FALSE 1. Few businesses plan to fail, but many of those that don’t succeed have failed to plan. Answer : True Difficulty : 1 Objective : 1 Terms to Learn : master budget 2. The master budget reflects the impact of operating decisions, but not financing decisions. Answer : False Difficulty : 1 Objective : 1 Terms to Learn : master budget The master budget reflects the impact of operating decisions and financing decisions. 3. Budgeted financial statements are also referred to as pro forma statements. Answer : True Difficulty : 1 Objective : 1 Terms to Learn : financial budget 4. Budgeting includes only the financial aspects of the plan and not any nonfinancial aspects such as the number of physical units manufactured. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : financial budget Budgeting includes both financial and nonfinancial aspects of the plan. 5. Budgeting helps management anticipate and adjust for trouble spots in advance. Answer : True Difficulty : 1 Objective : 1 Terms to Learn : financial budget 6. Budgets can play both planning and control roles for management. Answer : True Difficulty : 1 Objective : 1 Terms to Learn : financial budget 6-1
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Long-run planning and short-run planning are best performed independently of each other. Answer : False Difficulty : 2 Objective : 1 Terms to Learn : master budget Long-run planning and short-run planning are best performed as a part of an overall strategic planning process since they influence each other. 8. After a budget is agreed upon and finalized by the management team, the amounts should not be changed for any reason. Answer : False Difficulty : 2 Objective : 2 Terms to Learn : master budget Budgets should not be administered rigidly, but rather should be adjusted for changing conditions. 9. Even in the face of changing conditions, attaining the original budget is critical. Answer : False Difficulty : 3 Objective : 2 Terms to Learn : master budget Changing conditions usually call for a change in plans. Attaining the budget should not be an end in itself. 10. A four-quarter rolling budget encourages management to be thinking about the next 12 months. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : rolling budget 11. Research has shown that challenging budgets (rather than budgets that can be easily attained) are energizing and improve performance. Answer : True Difficulty : 2 Objective : 2 Terms to Learn : master budget 12. It is best to compare this year’s performance with last year’s actual performance rather than this year’s budget. Answer : False Difficulty : 3 Objective : 2 Terms to Learn : master budget It is best to compare this year’s performance with this year’s budget because inefficiencies and different conditions may be reflected in last year’s actual performance amounts. 6-2
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