Ch13 - Testbank PDF

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CHAPTER 13BUDGETARY PLANNINGSUMMARY OF QUESTIONS BY LEARNING OBJECTIVES ANDBLOOM’S TAXONOMYItem LO BT Item LO BT Item LO BT Item LO BT Item LO BTTrue-False Statements1. 1 K 9. 1 C 17. 1 K 25. 3 K 33. 2 K2. 1 C 10. 1 C 18. 1 C 26. 4 C 34. 3 K3. 1 C 11. 1 C 19. 2 C 27. 4 C 35. 4 K4. 1 C 12. 1 C 20. 2 ...

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CHAPTER 13 BUDGETARY PLANNING SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY Item

LO

BT

Item

LO

BT

1. 2. 3. 4. 5. 6. 7. 8.

1 1 1 1 1 1 1 1

K C C C C K K K

9. 10. 11. 12. 13. 14. 15. 16.

1 1 1 1 1 1 1 1

C C C C K K C K

37. 38. 39. 40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55. 56. 57. 58. 59. 60. 61.

1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1

K K K C C C K C C C C C C C C K K K K K K K C C AP

62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81. 82. 83. 84. 85. 86.

1 2 3 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 3 3 2 2

Item

LO

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Item

LO

BT

3 4 4 5 5 5 1 1

K C C K C C K K

Item

LO

BT

33. 34. 35. 36.

2 3 4 5

K K K C

True-False Statements 17. 18. 19. 20. 21. 22. 23. 24.

1 1 2 2 3 3 2 2

K C C C C K C C

25. 26. 27. 28. 29. 30. 31. 32.

Multiple Choice Questions K AP C C K C C C K C AP C K K AP AP AP AP AP AP AP C C K C

87. 88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110. 111.

2 2 2 2 3 3 3 2 2 3 2 2 2 2 2 3 2 4 2 4 3 3 3 4 4

C AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP AP C K AP AP

112. 113. 114. 115. 116. 117. 118. 119. 120. 121. 122. 123. 124. 125. 126. 127. 128. 129. 130. 131. 132. 133. 134. 135. 136.

4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4 4

AP C K C K C K AP AP K AP K C AP C AP AP AP AP AP AP AP AP AP AP

137. 138. 139. 140. 141. 142. 143. 144. 145. 146. 147. 148. 149. 150. 151. 152. 153. 154. 155. 156. 157. 158.

5 5 5 5 5 5 5 5 5 5 1 1 1 1 2 2 3 4 4 4 5 5

C K C C C C C C C C K K K K K AP K AP K AP K K

165. 166.

4 4

AP AP

167. 168.

4 4

AP AP

Brief Exercises 159. 160.

2 2

AP AP

161. 162.

2 2

AP 163. AP 164.

4 4

AP AP

13 - 2

Test Bank for Survey of Accounting, First Edition

SUMMARY OF QUESTIONS BY LEARNING OBJECTIVES AND BLOOM’S TAXONOMY Exercises 169. 170. 171. 172. 173. 174.

2 2 2 2 2 2

AP AP AP AP AP AP

175. 176. 177. 178. 179. 180.

2 3 2,3 2 3 3

AP AP C AP AP AP

181. 182. 183. 184. 185. 186.

2,3 3 3 4 4 4

AP AP AP AP AP AP

187. 188. 189. 190. 191. 192.

4 4 4 4 4 4

AP AP AP AP AP AP

1 4 5

K K K

193. 194. 195.

4,5 5 5

AP AP AP

Completion Statements 196. 197. 198.

1 1 1

K K K

199. 200. 201.

1 1 1

K K K

202. 203. 204.

1 1 2

K K K

205. 206. 207.

Matching 208. 1,2,4

K

Short-Answer Essay 209. 210.

1 1

K K

211. 212.

1 1

K K

213. 214.

1 1,2

K C

SUMMARY OF LEARNING OBJECTIVES BY QUESTION TYPE Item

Type

Item

Type

Item

1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

TF TF TF TF TF TF TF TF TF TF

11. 12. 13. 14. 15. 16. 17. 18. 31. 32.

TF TF TF TF TF TF TF TF TF TF

37. 38. 39. 40. 41. 42. 43. 44. 45. 46.

19. 20. 23. 24. 33. 34. 63. 65. 66. 67.

TF TF TF TF TF TF MC MC MC MC

68. 69. 70. 71. 72. 73. 74. 75. 76. 77.

MC MC MC MC MC MC MC MC MC MC

78. 79. 80. 81. 85. 86. 87. 88. 89. 90.

Type

Item

Type

Item

Learning Objective 1 MC 47. MC 57. MC 48. MC 58. MC 49. MC 59. MC 50. MC 60. MC 51. MC 61. MC 52. MC 62. MC 53. MC 147. MC 54. MC 148. MC 55. MC 149. MC 56. MC 150. Learning Objective 2 MC 94. MC 152. MC 95. MC 159. MC 97. MC 160. MC 98. MC 161. MC 99. MC 162. MC 100. MC 169. MC 101. MC 170. MC 103. MC 171. MC 105. MC 172. MC 151. MC 173.

Type

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Type

MC MC MC MC MC MC MC MC MC MC

196. 197. 198. 199. 200. 201. 202. 203. 205. 208.

C C C C C C C C C Ma

209. 210. 211. 212. 213. 214.

SA SA SA SA SA SA

MC BE BE BE BE Ex Ex Ex Ex Ex

174. 175. 176. 177. 178. 179. 180. 181. 203. 204.

Ex Ex Ex Ex Ex Ex Ex Ex C C

205. 208. 214.

C Ma SA

FOR INSTRUCTOR USE ONLY

Budgetary Planning

13 - 3

Learning Objective 3 21. 22. 25. 34.

TF TF TF TF

64. 82. 83. 84.

MC MC MC MC

91. 92. 93. 96.

26. 27. 35. 104. 106. 110. 111. 112.

TF TF TF MC MC MC MC MC

113. 114. 115. 116. 117. 118. 119. 120.

MC MC MC MC MC MC MC MC

121. 122. 123. 124. 125. 126. 127. 128.

28. 29. 30.

TF TF TF

36. 137. 138.

TF MC MC

139. 140. 141.

Note: TF = True-False MC = Multiple Choice SA = Short-Answer Essay

MC 102. MC MC 107. MC MC 108. MC MC 109. MC Learning Objective 4 MC 129. MC MC 130. MC MC 131. MC MC 132. MC MC 133. MC MC 134. MC MC 135. MC MC 136. MC Learning Objective 5 MC MC MC

142. 143. 144.

MC MC MC

153. 176. 177. 179.

MC Ex Ex Ex

180. 181. 182. 183.

Ex Ex Ex Ex

154. 155. 156. 163. 164. 165. 166. 167.

MC MC MC BE BE BE BE BE

168. 177. 184. 185. 186. 187. 188. 189.

BE Ex Ex Ex Ex Ex Ex Ex

145. 146. 157.

MC MC MC

158. MC 193. Ex 194. Ex

BE = Brief Exercise Ex = Exercise

190. Ex 191. Ex 192. Ex 193. Ex 206. C 208. Ma

195. 207.

Ex C

C = Completion Ma = Matching

CHAPTER LEARNING OBJECTIVES 1. State the essentials of effective budgeting and components of the master budget. The primary advantages of budgeting are that it (a) requires management to plan ahead, (b) provides definite objectives for evaluating performance, (c) creates an early warning system for potential problems, (d) facilitates coordination of activities, (e) results in greater management awareness, and (f) motivates personnel to meet planned objectives. The essentials of effective budgeting are (a) sound organizational structure, (b) research and analysis, and (c) acceptance by all levels of management. The master budget consists of the following budgets: (a) sales, (b) production, (c) direct materials, (d) direct labor, (e) manufacturing overhead, (f) selling and administrative expense, (g) budgeted income statement, (h) capital expenditure budget, (i) cash budget, and (j) budgeted balance sheet. 2. Prepare budgets for sales, production, and direct materials. The sales budget is derived from sales forecasts. The production budget starts with budgeted sales units, adds desired ending finished goods inventory, and subtracts beginning finished goods inventory to arrive at the required number of production units. The direct materials budget starts with the direct materials units (e.g., pounds) required for budgeted production, adds desired ending direct materials units, and subtracts beginning direct materials units to arrive at required direct materials units to be purchased. This amount is multiplied by the direct material cost (e.g., cost per pound) to arrive at the total cost of direct materials purchases. 3. Prepare budgets for direct labor, manufacturing overhead, and selling and administrative expenses, and a budgeted Income statement. The direct labor budget starts with the units to be produced as determined in the production budget. This amount is multiplied by the direct labor time per unit and the direct labor cost per hour to arrive at the total direct labor cost. The manufacturing overhead budget lists all of the individual types of FOR INSTRUCTOR USE ONLY

13 - 4

Test Bank for Survey of Accounting, First Edition

overhead costs, distinguishing between fixed and variable costs. The selling and administrative expenses budget lists all of the individual types of selling and administrative expense items, distinguishing between fixed and variable costs. The budgeted income statement is prepared from the various operating budgets. Cost of goods sold is determined by calculating the budgeted cost to produce one unit, then multiplying this amount by the number of units sold. 4. Prepare a cash budget and a budgeted balance sheet. The cash budget has three sections (receipts, disbursements, and financing) and the beginning and ending cash balances. Receipts and payments sections are determined after preparing separate schedules for collections from customers and payments to suppliers. The budgeted balance sheet is developed from the budgeted balance sheet from the preceding year and the various budgets for the current year. 5. Apply budgeting principles to nonmanufacturing companies. Budgeting may be used by merchandisers for development of a merchandise purchases budget. In service companies budgeting is a critical factor in coordinating staff needs with anticipated services. In not-forprofit organizations, the starting point in budgeting is usually expenditures, not receipts.

TRUE-FALSE STATEMENTS 1.

Budgets are statements of management's plans stated in financial terms.

Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

2.

A benefit of budgeting is that it provides definite objectives for evaluating performance.

Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

3.

A budget can be a means of communicating a company's objectives to external parties.

Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

4.

A budget can be used as a basis for evaluating performance.

Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

5.

A well-developed budget can operate and enforce itself.

Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

6.

The budget itself and the administration of the budget are the responsibility of the accounting department.

Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

7.

Effective budgeting requires clearly defined lines of authority and responsibility.

Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Business Economics

8.

The flow of input data for budgeting should be from the highest levels of responsibility to the lowest.

Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation

FOR INSTRUCTOR USE ONLY

Budgetary Planning 9.

13 - 5

Budgets can have a positive or negative effect on human behavior depending on the manner in which the budget is developed and administered.

Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Risk Management, AICPA PC: Interaction, IMA: Performance Measurement

10.

A budget can facilitate the coordination of activities among the segments of a large company.

Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation

11.

The longer the budget period, the more reliable the estimates of future outcomes.

Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem Solving, IMA: Budget Preparation

12.

The budget committee has the responsibility for coordinating the preparation of the budget.

Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Leadership, IMA: Budget Preparation

13.

The budget is developed within the framework of a sales forecast.

Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

14.

Budgeting and long-range planning are two terms that describe the same process.

Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

15.

Long-range plans are used more as a review of progress toward long-term goals rather than an evaluation of specific results to be achieved.

Ans: T, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

16.

The master budget reflects management's long-term plans encompassing five years or more.

Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

17.

The master budget consists of operating and financial budgets.

Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

18.

Financial budgets must be completed before the operating budgets can be prepared.

Ans: F, LO: 1, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

19.

The direct materials budget must be completed before the production budget because the quantity of materials available for production must be known.

Ans: F, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

20.

The number of direct labor hours needed for production is obtained from the production budget.

Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

21.

A manufacturing overhead budget is not needed if the company develops a predetermined overhead rate to apply overhead. FOR INSTRUCTOR USE ONLY

13 - 6

Test Bank for Survey of Accounting, First Edition

Ans: F, LO: 3, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

22.

The manufacturing overhead budget generally has separate sections for variable, mixed, and fixed costs.

Ans: F, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

23.

A production budget should be prepared before the sales budget.

Ans: F, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

24.

The direct materials budget contains both quantity and cost data.

Ans: T, LO: 2, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

25.

The budgeted income statement indicates the expected profitability of operations for the next year.

Ans: T, LO: 3, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

26.

If a monthly cash budget is prepared properly, there will never be a cash deficiency at the end of any month.

Ans: F, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

27.

The budgeted balance sheet is prepared entirely from the budgets for the current year.

Ans: F, LO: 4, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Resource Management, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

28.

The starting point when budgeting for a not-for-profit organization is generally to budget expenditures first.

Ans: T, LO: 5, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

29.

A merchandiser has a merchandise purchases budget rather than a production budget.

Ans: T, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

30.

A critical factor in budgeting for a service firm is to determine the amount of products to purchase.

Ans: F, LO: 5, Bloom: C, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

31.

The budget itself and the administration of the budget are entirely accounting responsibilities.

Ans: F, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Industry/Sector Perspective, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

32.

A sales forecast shows potential sales for the industry and the company’s expected share of such sales.

Ans: T, LO: 1, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC: Problem Solving, IMA: Budget Preparation

33.

The direct materials budget is derived from th...