BAC3674 Budgeting

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

• True

• False

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

• True

• False

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

• True

• False

Effective budgeting requires clearly defined lines of authority and responsibility.

• True

• False

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

• True

• False

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

• True

• False

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

• True

• False

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

• True

• False

The direct materials budget is derived from the direct materials units required for production plus desired ending direct materials units less beginning direct materials units.

• True

• False

Why are budgets useful in the planning process?

• 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.