Which of the following represents a general

framework for guiding management’s operating

decisions containing projected activity levels for

the next year?

• organizational goals implementation plan.

• strategic long-range profit plan

• master budget

• none of the above

Which of the following is not a benefit of

participative or grassroots budgeting?

a. The process of participative budget

• The process of participative budgeting can be

  time consuming.

• Participating budgeting enhances employee

  motivation and acceptance of goals

• Patricipative budgeting provides information

  that enables employees to associate rewards

  and penalties with performance

• Participative budgeting yields information that

  employees know but managers do not know

Budget slack occurs when:

• employees refuse to abide by the budget.

• the budget is so difficult to meet that employees

  slack off from work.

• employees ask for resources in excess of what

  they need to meet budget objectives.

• employees ask for fewer resources than they

  need to meet budget objectives.

A continuous budget:

• drops the current month or quarter and adds a

  future month or a future quarter as the current

  month or quarter is completed.

• presents a statement of expectations for a period

  but does not present a firm commitment.

• presents the plan for only one level of activity

  and does not adjust to changes in the level of

  activity.

• presents the plan for a range of activity so that

  the plan can be adjusted for changes in activity.

Each organization plans and budgets its

operations for slightly different reasons. Which one of the following is not a significant reason for planning?

• Providing a basis for controlling operations.

• Forcing managers to consider expected future trends and conditions.

• Ensuring profitable operations.

• Checking progress toward the objectives of the organization.

When developing a budget, an external factor to consider in the planning process is

• A change to a decentralized management system.

• New product development.

• The implementation of a new bonus program.

• The merger of two competitors.

A firm develops an annual cash budget in order to

• Support the preparation of its cash flow statement for the annual report.

• Ascertain which capital expenditure projects are feasible and which capital expenditure projects should be deferred.

• Determine the opportunity costs of alternative sales and production strategies.

• Avoid the opportunity costs of noninvested excess cash and minimize the cost of interim financing.

The primary reason why managers impose a minimum cash balance in the cash budget is

• because management needs discretionary cash for unforeseen business opportunities.

• managers lack discipline to control their spending.

• that it protects the organization from the uncertainty of the budgeting process.

• that it makes the financial statements look more appealing to creditors.

The major feature of zero-based budgeting is that it

• Takes the previous year’s budgets and adjusts them for inflation.

• Questions each activity and determines whether it should be maintained as it is, reduced, or eliminated.

• Assumes all activities are legitimate and worthy of receiving budget increases to cover any increased costs.

• Focuses on planned capital outlays for property, plant and equipment.

The budget that is usually the most difficult to forecast is the

• Cash budget

• Manufacturing overhead budget

• Expense budget

• Sales budget