Budgeting Quiz

Which of the following is NOT a benefit of budgeting?

• Management can plan ahead

• An early warning system is provided

• It enables disciplinary action at every level

• Coordination of activities is facilitated

Which of the following is NOT an essential of effective budgeting?

• Top-down budgeting

• Management acceptance

• Research and analysis

• Sound organizational structure

The master budget consists of which two main classes of budgets?

• Sales and production budgets

• Operating and financial budgets

• Direct materials and direct labor budgets

• Manufacturing and selling budgets

What is the first budget typically prepared in a master budget?

• Production budget

• Sales budget

• Direct materials budget

• Cash budget

Which of the following is a characteristic of participative budgeting?

• Always leads to budgetary slack

• Involves only top management

• Encourages lower-level manager input

• Eliminates the need for coordination

A disadvantage of participative budgeting is:

• Increased fairness in budgeting process

• Budgetary slack

• Improved accuracy of estimates

• Higher managerial motivation

A sales forecast is important in budgeting because it:

• Represents management’s revenue goals

• Shows potential industry sales and company’s share

• Replaces the production budget

• Focuses only on external market conditions

The production budget is derived from:

• Sales budget and desired ending finished goods inventory

• Direct materials budget and sales budget

• Master budget and capital expenditures budget

• Cash budget and sales forecast

In the direct materials budget, required purchases are calculated as:

• Beginning inventory – desired ending inventory + production needs

• Required production units + desired ending inventory – beginning inventory

• Required units of direct materials x cost per unit

• Budgeted sales x selling price per unit

Direct labor budget shows:

• Cost and units of raw materials to purchase

• Quantity and cost of labor needed for production

• Sales and production targets

• Expected number of salespersons needed