Question ACC556 Financial Accounting for Managers

09 Jun Question ACC556 Financial Accounting for Managers

Question
ACC556 Financial Accounting for Managers

CHAPTER 21 EXERCISE

Question 1 A benefit of budgeting is that it provides definite objectives for evaluating performance.

Answers:

True

False

Question 2 Effective budgeting requires clearly defined lines of authority and responsibility.

Answers:

True

False

Question 3 Financial budgets must be completed before the operating budgets can be prepared.

Answers:

True

False

Question 4 The budgeted income statement indicates the expected profitability of operations for the next year.

Answers:

True

False

Question 5 Why are budgets useful in the planning process?

Answers:

They provide management with information about the company’s past performance.

They help communicate goals and provide a basis for evaluation.

They guarantee the company will be profitable if it meets its objectives.

They enable the budget committee to earn their paycheck.

Question 6 Which of the following statements about budget acceptance in an organization is true?

Answers:

The most widely accepted budget by the organization is the one prepared by top management.

The most widely accepted budget by the organization is the one prepared by the department heads.

Budgets are hardly ever accepted by anyone except top management.

Budgets have a greater chance of acceptance if all levels of management have provided input into the budgeting process.

Question 7 The budget committee would not normally include the

Answers:

research director.

treasurer.

sales manager.

external auditor.

Question 8 The production budget shows expected unit sales are 100,000. The required production units are 104,000. What are the beginning and desired ending finished goods units, respectively?

Beginning Units Ending Units

Answers:

10,000 6,000

6,000 10,000

4,000 10,000

10,000 4,000

Question 9 A company budgeted unit sales of 204,000 units for January, 2013 and 240,000 units for February 2013. The company has a policy of having an inventory of units on hand at the end of each month equal to 30% of next month’s budgeted unit sales. If there were 61,200 units of inventory on hand on December 31, 2012, how many units should be produced in January, 2013 in order for the company to meet its goals?

Answers:

214,800 units

204,000 units

193,200 units

276,000 units

Question 10 A company determined that the budgeted cost of producing a product is $30 per unit. On June 1, there were 80,000 units on hand, the sales department budgeted sales of 300,000 units in June, and the company desires to have 120,000 units on hand on June 30. The budgeted cost of goods manufactured for June would be

Answers:

$7,800,000.

$11,400,000.

$9,000,000.

$10,200,000.

Question 11 The single most important output in preparing financial budgets is the

Answers:

sales forecast.

determination of the unit cost of the product.

cash budget.

budgeted income statement.

Question 12 What is the proper preparation sequencing of the following budgets?

1 – Budgeted Balance Sheet

2 – Sales Budget

3 – Selling and Administrative Budget

4 – Budgeted Income Statement

Answers:

1, 2, 3, 4

2, 3, 1, 4

2, 3, 4, 1

2, 4, 1, 3

Question 13 The formula for determining budgeted merchandise purchases is budgeted

Answers:

production + desired ending inventory – beginning inventory.

sales + beginning inventory – desired ending inventory.

cost of goods sold + desired ending inventory – beginning inventory.

cost of goods sold + beginning inventory – desired ending inventory.

Question 14 Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities will prepare?

Answers:

Orange Co. will prepare a production budget, and Pineapple Company will prepare a merchandise purchases budget.

Orange Co. will prepare a sales forecast, and Pineapple Company will prepare a sales budget.

Pineapple Company will prepare a production budget, and Orange Co. will prepare a merchandise purchases budget.

Both companies will prepare the same types of budgets.

Question 15 The budget that is often considered to be the most important financial budget is the

Answers:

cash budget.

capital expenditure budget.

budgeted income statement.

budgeted balance sheet.

Question 16

Match the items below by entering the appropriate code letter in the space provided.

Management’s plans expressed in financial terms for a specified future time period.

Budget

Budgets that indicate the cash resources needed for expected operations and planned capital expenditures.

Financial budgets

A group responsible for coordinating the preparation of the budget.

Budget committee

A set of interrelated budgets that constitute a plan of action for a specified time period.

Master budget

The projection of potential sales for the industry and the company’s expected share of such sales.

Sales forecast

A projection of production requirements to meet expected sales.

Production budget

A projection of anticipated cash flows.

Cash budget

A selection of strategies to achieve long-term goals.

Long-range planning

An estimate of the quantity and cost of direct materials to be purchased.

Direct materials budget

An estimate of expected sales for the budget period.