Fundementals Of Cost Accounting Seventh Edition-McGraw Hill- ACCT521 CH 13 QUESTIONS Week 6

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The financial plan of the revenues and resources needed to carry out activities and meet financial goals is called a(n) budget Blank 1 Blank 1 budget , Correct Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: budget Strengths of a company that enable it to outperform competitors are Blank______. Multiple choice question. strategic long-range plans organization goals profit plans critical success factors correct Correct Answer critical success factors Major components of a master budget are the Blank______. Multiple select question. financial trend analysis strategic long-range profit plan correct organization goals correct tactical short-range profit plan correct Correct Answer  strategic long-range profit plan  organization goals  tactical short-range profit plan A company's broad objectives established by management that employees work to achieve are Blank______. Multiple choice question.

critical success factors organizational goals correct strategic long-range plans econometric models Correct Answer organizational goals A statement detailing steps to take to achieve a company's organization goals is called a(n) Strategic Blank 1 Blank 1 Strategic , Correct Unavailable long Blank 2 Blank 2 long , Correct Unavailable- range Blank 3 Blank 3 range , Correct Unavailable plan. (Enter only one word per blank.) Correct Answer  Blank 1: strategic  Blank 2: long  Blank 3: range The profit plan is the Blank______ portion of the master budget. Multiple choice question. balance sheet statement of retained earnings statement of cash flows income statement correct Correct Answer income statement The strengths of a company that enable it to outperform competitors are their critical Blank 1 Blank 1 critical , Correct Unavailable success Blank 2 Blank 2 success , Correct Unavailable factors. (Enter only one word per blank.) Correct Answer  Blank 1: critical

 Blank 2: success Budgets should Blank______. Multiple choice question. be viewed in purely quantitative, technical terms Reason: While this can happen, it should not. consider the importance of the human factor correct Correct Answer consider the importance of the human factor A financial plan of an organization for the coming year or other planning period is called a(n) master Blank 1 Blank 1 master , Correct Unavailable budget. (Enter only one word per blank.) Correct Answer  Blank 1: master, planning, or static Participative budgeting Blank______. Multiple select question. yields information that managers do not know correct can serve a management training or development role incorrect involves using input from lower and middle management correct saves time and costs during the budgeting process Reason: The obvious cost of participative budgeting is that it is time-consuming. enhances employee motivation correct Correct Answer  yields information that managers do not know

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 can serve a management training or development role  involves using input from lower and middle management  enhances employee motivation A company's broad objectives established by management that employees work to achieve are called Organization Blank 1 Blank 1 Organization , Correct Unavailable goals Blank 2 Blank 2 goals , Correct Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: organizational, organization, or organisational  Blank 2: goals or goal Which of the following statements are correct? Multiple select question. The master budget generally provides detailed figures for the upcoming 2 - 3 fiscal years. Reason: Detailed figures are generally provided for just the coming fiscal year. Final budget approvals are made shortly before the fiscal year begins. correct Reason: Final budget approvals are made one month to six weeks before the beginning of the fiscal year. The master budget must be prepared prior to the organizational goals, strategies, and long-range plans. Budgeting is an ongoing process in most companies. correct Correct Answer  Final budget approvals are made shortly before the fiscal year begins.  Budgeting is an ongoing process in most companies. Which of the following are true of strategic long-range plans? Multiple select question.

They are the financial plans of an organization for the coming year or other planning period. Reason: This is a master budget. They are statements detailing steps to take to achieve a company's organizational goals. correct They usually span one year or less. They are usually stated in rather broad terms. correct Correct Answer  They are statements detailing steps to take to achieve a company's organizational goals.  They are usually stated in rather broad terms. Many companies begin preparation of the master budget with the sales budget because, for many organizations, sales are most Blank______. Multiple choice question. definite uncertain correct controllable Correct Answer uncertain Terms for a master budget include Blank______. Multiple select question. budget plan correct profit plan planning budget correct static budget correct Correct Answer  budget plan

 planning budget  static budget In most firms, forecasting Blank______ is the most difficult aspect of budgeting. Multiple choice question. equipment needs production sales correct labor costs Correct Answer sales Budget preparation rests on Blank______ estimates of an unknown future. Multiple choice question. quantitative human correct technical Correct Answer human The sales staff Blank______. Multiple select question. have an incentive to provide the most accurate forecast Reason: They may have an incentive to bias the forecast due to future evaluation. is generally evaluated, at least in part, on the sales budget correct may possess the best information about customer needs correct Correct Answer  is generally evaluated, at least in part, on the sales budget  may possess the best information about customer needs

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The use of input from lower- and middle-management employees is often called participative budgeting or grass Blank 1 Blank 1 grass , Correct Unavailable roots Blank 2 Blank 2 roots , Correct Unavailable budgeting. (Enter only one word per blank.) Correct Answer  Blank 1: grass  Blank 2: roots Which of the following is not true about the development of the master budget? Multiple choice question. The bulk of the work of developing a budget happens one month preceding the beginning of the coming fiscal year. correct Budgets are created after organizational goals, strategies, and long-range plans are created. Budgeting is an ongoing process for most organizations. Correct Answer The bulk of the work of developing a budget happens one month preceding the beginning of the coming fiscal year. True or false: Incentive compensation plans do not motivate behaviors. True false question. True Reason: Incentive plans can motivate behaviors. Falsecorrect Correct Answer False If production is more uncertain than sales, it is reasonable to start the master budget with a forecast of Blank______.

Multiple choice question. expected sales production correct cash flow income Correct Answer production The forecasting method where individual forecasts of group members are submitted anonymously and evaluated by the group as a whole is called the 1 Blank 1 Blank 1 1 , Incorrect Unavailable 1 Blank 2 Blank 2 1 , Incorrect Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: Delphi  Blank 2: technique Forecasting sales is difficult due to Blank______. Multiple choice question. certainty too much information subjectivity correct Correct Answer subjectivity The forecasting method that ranges from a simple visual extrapolation of points on a graph to a highly sophisticated computerized time series analysis is called Blank______. Multiple choice question. trend analysis correct market research the Delphi technique

horizontal analysis Correct Answer trend analysis Which of the following are true of salespeople's role in sales forecasting? Multiple select question. Salespeople may have the best information to help forecast sales. correct Salespeople are evaluated on actual performance only and never on budgeted expectations. Salespeople may have an incentive to bias their sales forecasts. correct Correct Answer  Salespeople may have the best information to help forecast sales.  Salespeople may have an incentive to bias their sales forecasts. Statistical methods of forecasting economic data using regression analysis is called econometric Blank 1 Blank 1 econometric , Correct Unavailable models. (Enter only one word per blank.) Correct Answer  Blank 1: econometric Bonuses based on sales is an example of a(n) incentive Blank 1 Blank 1 incentive , Correct Unavailable compensation Blank 2 Blank 2 compensation , Correct Unavailable plan. (Enter only one word per blank.) Correct Answer  Blank 1: incentive  Blank 2: compensation

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A plan of resources needed to meet current sales demand and ensure that inventory levels are sufficient for future sales is the production Blank 1 Blank 1 production , Correct Unavailable budget Blank 2 Blank 2 budget , Correct Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: production  Blank 2: budget The group method used to enhance forecasting and reduce bias in estimates is Blank______. Multiple choice question. the Delphi technique correct trend analysis market research econometric modeling Correct Answer the Delphi technique The forecasting method that ranges from a simple visual extrapolation of points on a graph to a highly sophisticated computerized time series analysis is called trend Blank 1 Blank 1 trend , Correct Unavailable analysis Blank 2 Blank 2 analysis , Correct Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: trend  Blank 2: analysis Materials to be used in production + Estimated ending materials inventory – Estimated beginning materials inventory = 1 Blank 1 Blank 1 1 , Incorrect Unavailable 1 Blank 2 Blank 2 1 , Incorrect Unavailable 1 Blank 3 Blank 3 1 , Incorrect Unavailable. (Enter only one word per blank.)

Correct Answer  Blank 1: Required  Blank 2: materials or material  Blank 3: purchases or purchase The predicted sales for the coming period can be related to such factors as Blank______. Multiple select question. consumer-confidence indexes correct supplier-demand indexes economic indicators correct Correct Answer  consumer-confidence indexes  economic indicators Morris Company is planning on producing 200,000 units. Direct labor is estimated at 0.25 hours per unit at a cost of $10 per hour. The total direct labor needed is Blank______ hours. Multiple choice question. 100,000 Reason: 200,000 units × 0.25 hours per unit = 50,000 hours 200,000 Reason: 200,000 units × 0.25 hours per unit = 50,000 hours 50,000 correct Reason: 200,000 units × 0.25 hours per unit = 50,000 hours 150,000 Reason: 200,000 units × 0.25 hours per unit = 50,000 hours

Correct Answer 50,000 The use of input from lower- and middle-management employees is often called participative budgeting or grass Blank 1 Blank 1 grass , Correct Unavailable roots Blank 2 Blank 2 roots , Correct Unavailable budgeting. (Enter only one word per blank.) Correct Answer  Blank 1: grass  Blank 2: roots To simplify the budgeting process, overhead costs are usually divided into which of the following? Multiple select question. Fixed correct Material Variable correct Labor Correct Answer  Fixed  Variable The budgeted level of production can be calculated using which of the following formulas? Multiple choice question. Required production = Budgeted sales + Units in ending inventory – Units in beginning inventory correct Required production = Budgeted sales – Units in ending inventory – Units in beginning inventory

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Required production = Budgeted sales – Units in ending inventory + Units in beginning inventory Required production = Budgeted sales + Units in ending inventory + Units in beginning inventory Correct Answer Required production = Budgeted sales + Units in ending inventory – Units in beginning inventory Cost of goods sold = Multiple choice question. Beginning finished goods inventory – Cost of goods manufactured + Ending finished goods inventory Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory correct Beginning finished goods inventory + Cost of goods manufactured + Ending finished goods inventory Beginning finished goods inventory – Cost of goods manufactured – Ending finished goods inventory Correct Answer Beginning finished goods inventory + Cost of goods manufactured – Ending finished goods inventory The forecasting method where individual forecasts of group members are submitted anonymously and evaluated by the group as a whole is called the delphi Blank 1 Blank 1 delphi , Correct Unavailable method Blank 2 Blank 2 method , Incorrect Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: Delphi  Blank 2: technique Morris Company is planning on producing 200,000 units. Direct labor is estimated at 0.25 hours per unit at a cost of $10 per hour. The total direct labor cost is Blank______.

Multiple choice question. $1,500,000 Reason: (200,000 units × 0.25 hours per unit) × $10 per hour = $500,000 $500,000 correct Reason: (200,000 units × 0.25 hours per unit) × $10 per hour = $500,000 $1,000,000 Reason: (200,000 units × 0.25 hours per unit) × $10 per hour = $500,000 $2,000,000 Reason: (200,000 units × 0.25 hours per unit) × $10 per hour = $500,000 Correct Answer $500,000 Which of the following are true of a first-draft budget? Multiple select question. It usually undergoes a good deal of coordinating and revising before it is considered final. correct Uncovered bottlenecks in production can affect the sales forecast, requiring budget revisions. correct The revision process can only occur once. The production budget is formally adopted once the production department finalizes revisions. Correct Answer  It usually undergoes a good deal of coordinating and revising before it is considered final.  Uncovered bottlenecks in production can affect the sales forecast, requiring budget revisions. Budgeting overhead requires an estimate based on Blank______.

Multiple select question. administration needs Reason: Administrative costs are not part of overhead. long-range capacity correct production levels correct management discretion correct Correct Answer  long-range capacity  production levels  management discretion Which of the following are true regarding budgeting for marketing and administrative costs? Multiple select question. Managers have discretion about the amount and timing of marketing and administrative expenditures. correct The marketing and administrative budgeting objective is to develop goals that maximize management bonuses. It is easy to establish a direct link between the costs and benefits of marketing and administrative functions. Creating budgets for marketing and administrative costs is often more difficult than creating the production cost budget. correct Correct Answer  Managers have discretion about the amount and timing of marketing and administrative expenditures.  Creating budgets for marketing and administrative costs is often more difficult than creating the production cost budget. Information needed to calculate cost of goods sold includes Blank______. Multiple select question. beginning finished goods inventory

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correct ending finished goods inventory correct beginning work in process inventory ending work in process inventory cost of goods manufactured correct Correct Answer  beginning finished goods inventory  ending finished goods inventory  cost of goods manufactured Accounts receivable had a beginning balance of $600,000 and an ending balance of $1,000,000. Calculate total sales if the transferred out amount totaled $5,000,000. Multiple choice question. $4,600,000 Reason: 1,000,000 + 5,000,000 – 600,000 = $5,400,000 $6,600,000 Reason: 1,000,000 + 5,000,000 – 600,000 = $5,400,000 $5,400,000 correct Reason: 1,000,000 + 5,000,000 – 600,000 = $5,400,000 $6,000,000 Reason: 1,000,000 + 5,000,000 – 600,000 = $5,400,000 Correct Answer $5,400,000 The group method used to enhance forecasting and reduce bias in estimates is Blank______.

Multiple choice question. econometric modeling market research trend analysis the Delphi technique correct Correct Answer the Delphi technique The purpose of cash budgeting is to Blank______. Multiple select question. determine whether enough cash is available for present and future operations correct maximize interest earned on cash balances correct maximize the equity of the company ensure company solvency correct Correct Answer  determine whether enough cash is available for present and future operations  maximize interest earned on cash balances  ensure company solvency Your Answer correct Transactions that reduce collections of accounts receivable include Blank______. Multiple select question. cash discounts correct multiperiod cash collections bad debts correct

Correct Answer  cash discounts  bad debts The budget is not formally adopted until the Blank______ approve(s) the master budget. Multiple choice question. stockholders chief financial officer board of directors correct production workers Correct Answer board of directors Optimal levels of capital investment in long-term assets, investment in working capital, and financing decisions fall under the Blank______ function. Multiple choice question. treasurer's correct plant manager's CEO's Correct Answer treasurer's Budgets for marketing and administrative costs Blank______. Multiple select question. may include costs that appear unnecessary correct are often more difficult to create than production cost budgets correct may include costs that are related to compensation packages correct

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should be based on direct links between costs and the impact on sales Reason: This is often difficult, if not impossible to do. Correct Answer  may include costs that appear unnecessary  are often more difficult to create than production cost budgets  may include costs that are related to compensation packages The merchandise purchase budget is similar to the direct Blank 1 Blank 1 direct , Correct Unavailable material Blank 2 Blank 2 material , Incorrect Unavailable purchases Blank 3 Blank 3 purchases , Correct Unavailable budget in manufacturing. (Enter only one word per blank.) Correct Answer  Blank 1: direct  Blank 2: materials  Blank 3: purchases or purchase The basic cost flow equation is Blank______, Multiple choice question. EB + TI – TO = BB BB + TO – TI = EB BB – TI – TO = EB BB + TI – TO = EB correct Correct Answer BB + TI – TO = EB Key differences in the master budget of a service enterprise is the absence of Blank______. Multiple select question.

material inventories correct product inventories correct overhead costs Correct Answer  material inventories  product inventories All revenues, costs and other transactions are examined in terms of their effects on cash in order to prepare a(n) cash Blank 1 Blank 1 cash , Correct Unavailable budget Blank 2 Blank 2 budget , Correct Unavailable. (Enter only one word per blank.) Correct Answer  Blank 1: cash  Blank 2: budget or budgets Because management performance is compared to budgets they help create, budgeting creates serious ethical Blank 1 Blank 1 ethical , Correct Unavailable issues for many people. (Enter only one word per blank.) Correct Answer  Blank 1: ethical, ethic, or ethics Given the following information, how much cash is collected in February ? January Total Sales = $500,000 February Total Sales = $400,000 Assumptions for the budget:

• 20 percent is collected in the month of sales • 75 percent is collected in the next month • 2 percent is taken as a cash discount • 3 percent will not be collected because accounts are written off as bad debts Multiple choice question. $480,000 Reason: ($500,000 × 75%) + ($400,000 × 20%) = $455,000 $455,000 correct Reason: ($500,000 × 75%) + ($400,000 × 20%) = $455,000 $441,350 Reason: ($500,000 × 75%) + ($400,000 × 20%) = $455,000 $475,000 Reason: ($500,000 × 75%) + ($400,000 × 20%) = $455,000 Correct Answer $455,000 Asking hypothetical questions in order to evaluate an organization's exposure to risk is the basis of Sensitivity Blank 1 Blank 1 Sensitivity , Correct Unavailable analysis. (Enter only one word per blank.) Correct Answer  Blank 1: sensitivity The statement of financial position is also called the budgeted balance Blank 1 Blank 1 balance , Correct Unavailable sheet Blank 2 Blank 2 sheet , Correct Unavailable. (Enter only one word per blank.) Correct Answer

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 Blank 1: balance  Blank 2: sheets or sheet Which of the following are reasons that zero-based budgeting (ZBB) is generally not applied to all units of an organization? Multiple select question. ZBB cannot assist management in choosing among alternative levels of effort in different units of an organization. ZBB is time-consuming to apply. correct The biggest benefit of ZBB is in those areas where the link between effort or inputs and outputs is the most difficult to determine. correct ZBB is prohibited by GAAP. Correct Answer  ZBB is time-consuming to apply.  The biggest benefit of ZBB is in those areas where the link between effort or inputs and outputs is the most difficult to determine. A merchandiser does not have a(n) production Blank 1 Blank 1 production , Correct Unavailable budget but instead has a merchandiser purchases budget. (Enter only one word per blank.) Correct Answer  Blank 1: production Service organizations do not complete a(n) production Blank 1 Blank 1 production , Correct Unavailable budget or a merchandise purchases budget. (Enter only one word per blank.) Correct Answer  Blank 1: production

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Ethical issues arise in the budgeting process due to managers Blank______. Multiple select question. being evaluated for budget results correct having too much control over the differences between budgets and actuals providing much of the information for the budget correct Correct Answer  being evaluated for budget results  providing much of the information for the budget By asking and answering hypothetical questions during the planning phase, Blank______ analysis helps management determine the risk of various phases of its operations and develop contingency plans. Multiple choice question. budget performance sensitivity correct management Correct Answer sensitivity Which of the following are true of zero-based budgeting (ZBB)? Multiple select question. ZBB is a process to assist management in choosing among alternative levels of effort in different units of the organization. correct ZBB is a different method to calculate required production levels, input requirements, and estimates of cash flows.

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Once the decision is made to apply ZBB in an organization, it must be applied to all units of the business. ZBB is time consuming to apply. correct Correct Answer  ZBB is a process to assist management in choosing among alternative levels of effort in different units of the organization.  ZBB is time consuming to apply.

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Fundementals Of Cost Accounting Seventh Edition-McGraw Hill- ACCT521 CH 13 QUESTIONS Week 6

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