Budgeting supports the planning process by encouraging all of the following
activities except:
b. Directing and coordinating operations during the period.
A formal written statement of management’s plans for the future, packaged in
financial terms, is a:
b. budget
Overhead allocation based solely on a measure of volume such as direct labor-
hours:
d. will systematically overcost high-volume products and undercost low-volume products
Changing a cost accounting system is likely to meet with little resistance in an
organization since it is a technical matter of little interest to individuals outside of
the accounting department.
False
An imposed budget is the same as participative budget.
False
f a firm's net income (loss) does not change as its volume changes, the firm('s)
-sales price must equal its variable costs
As projected net income increases the
-degree of operating leverage declines
A basic tenet of variable costing is that period costs should be currently
expensed. What is the rationale behind this procedure?
-Because period costs will occur whether production occurs, it is improper to allocate
these costs to production and defer a current cost of doing business
The following information regarding fixed production costs from a manufacturing
firm is available for the current year:
Fixed costs in the beginning inventory P16,000
Fixed costs incurred this period 100,000
-Using variable costing, this firm will deduct no more than P16,000 for fixed production
costs
Absorption costing differs from variable costing in all of the following except
-treatment of variable production costs
Budgeting
MODULE 8 - BUDGETING
THEORIES:
Basic Concepts
1.The concept of “management by exception” refers to management’s consideration of
A.only those items that vary materially from expectations.
B.only rare events.
C.samples selected at random.
D.only significant unfavorable deviations.
8.A formal written statement of management’s plans for the future, packaged in financial terms,
is a:
A.Responsibility report.C.Cost of production report.
B.Performance report.D.Budget.
2.Budgets are related to which of the following management functions?
A.PlanningC.Control
B.Performance evaluationD.all of these
22.Budgeting supports the planning process by encouraging all of the following activities except:
A.Requiring all organizational units to establish their goals for the coming period.
B.Increasing the motivation of managers and employees by providing agreed-upon
expectations.
C.Improving overall decision making by considering all viewpoints, options, and cost control
programs.
D.Directing and coordinating operations during the period.
3. Which of the following advantages does a budget mostly provide?
A.Coordination is increased.
B.Planning is emphasized.
C.Communication is continuous.
D.Comparison of actual versus budgeted data.
24.Which of the following is NOT an advantage of budgeting?
A.It forces managers to plan.
B.It provides resource information that can be used to improve decision making.
C.It aids in the use of resources and employees by setting a benchmark that can be used
for the subsequent evaluation of performance.
D.It provides organizational independence.
4.Which of the following is least likely a reason why a company prepares its budget?
A.To provide a basis for comparison of actual performance
B.To communicate the company’s plans throughout the entire business organization
C.To control income and expenditure in a particular period.
D.To make sure the company expands its operations.
5.Which of the following does not contribute to an effective budgeting?
A.Top management is involved in budgeting.
B.To give each manager a free hand in the preparation of the budget, the data within the
master budget are flexible.
C.The organization is divided into responsibility units.
D.There is communication of results.
6.The budgets that are based on a very high levels of performance, like expected costs using
ideal standards,
A.assist in planning the operations of the company
B.stimulate people to perform better than they ordinarily would
C. are helpful in evaluating the performance of managers
D.can lead to low levels of performance
7.Which of the following statements is incorrect?
A.An imposed budget is the same as a participative budget.
B.Preparation of the budget would be the responsibility of each responsibility unit.
C.Top management’s support is necessary to promote budget participation.
D.The top management should review and approve each responsibility unit’s budget.
9.The primary role of the budget director and the budgeting department is to
A.Settle disputes among operating executives during the development of the annual
operating plan.
B.Develop the annual profit plan by selecting the alternatives to be adopted form the
suggestions submitted by the various operating segments.
C.Compile the budget and manage the budget process.
D.Justify the budget to the corporate planning committee of the board of directors.
10.The primary variable affecting active participation and commitment to the budget and the
control system is
A.Management efforts to achieve the budget rather than optimize results.
B.The rigid adherence to the budget without recognizing changing conditions.
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