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1.

LO 7.1Which of the following is not a part of budgeting?

  1. planning
  2. finding bottlenecks
  3. providing performance evaluations
  4. preventing net operating losses
2.

LO 7.1Which of the following is an operating budget?

  1. cash budget
  2. production budget
  3. tax budget
  4. capital budget
3.

LO 7.1Which of the following is a finance budget?

  1. cash budget
  2. production budget
  3. direct materials purchasing budget
  4. tax budget
4.

LO 7.1Which approach is most likely to result in employee buy-in to the budget?

  1. top-down approach
  2. bottom-up approach
  3. total participation approach
  4. basing the budget on the prior year
5.

LO 7.1Which approach requires management to justify all its expenditures?

  1. bottom-up approach
  2. zero-based budgeting
  3. master budgeting
  4. capital allocation budgeting
6.

LO 7.1Which of the following is true in a bottom-up budgeting approach?

  1. Every expense needs to be justified.
  2. Supervisors tell departments their budget amount and the departments are free to work within those amounts.
  3. Departments budget their needs however they see fit.
  4. Departments determine their needs and relate them to the overall goals.
7.

LO 7.1The most common budget is prepared for a ________.

  1. week
  2. month
  3. quarter
  4. year
8.

LO 7.2Which of the operating budgets is prepared first?

  1. production budget
  2. sales budget
  3. cash received budget
  4. cash payments budget
9.

LO 7.2The direct materials budget is prepared using which budget’s information?

  1. cash payments budget
  2. cash receipts budget
  3. production budget
  4. raw materials budget
10.

LO 7.2Which of the following is not an operating budget?

  1. sales budget
  2. production budget
  3. direct labor budget
  4. cash budget
11.

LO 7.2Which of the following statements is not correct?

  1. The sales budget is computed by multiplying estimated sales by the sales price.
  2. The production budget begins with the sales estimated for each period.
  3. The direct materials budget begins with the sales estimated for each period.
  4. The sales budget is typically the first budget prepared.
12.

LO 7.2The units required in production each period are computed by which of the following methods?

  1. adding budgeted sales to the desired ending inventory and subtracting beginning inventory
  2. adding beginning inventory, budgeted sales, and desired ending inventory
  3. adding beginning inventory to budgeted sales and subtracting desired ending inventory
  4. adding budgeted sales to the beginning inventory and subtracting the desired ending inventory.
13.

LO 7.3The cash budget is part of which category of budgets?

  1. sales budget
  2. cash payments budget
  3. financial budget
  4. operating budget
14.

LO 7.3Which is not a section of the cash budget?

  1. cash receipts
  2. cash disbursements
  3. allowance for uncollectible accounts
  4. financing needs
15.

LO 7.3Which budget is the starting point in preparing financial budgets?

  1. the budgeted income statement
  2. the budgeted balance sheet
  3. the capital expense budget
  4. the cash receipts budget
16.

LO 7.3Which of the following includes only financial budgets?

  1. capital asset budget, budgeted income statement, sales budget
  2. production budget, capital asset budget, budgeted balance sheet
  3. cash budget, budgeted balance sheet, capital asset budget
  4. budgeted income statement, direct material purchases budget, cash budget
17.

LO 7.4Which budget evaluates the results of operations at the actual level of activity?

  1. capital budget
  2. cash budget
  3. flexible budget
  4. static budget
18.

LO 7.4What is the main difference between static and flexible budgets?

  1. The fixed manufacturing overhead is adjusted for units sold in the flexible budget.
  2. The variable manufacturing overhead is adjusted in the static budget.
  3. There is no difference between the budgets.
  4. The variable costs are adjusted in a flexible budget.
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