CHAPTER 20
BUDGETARY PLANNING
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT
True-False Statements
sg
1. 1 K 9. 2 C 17. 3 K 25. 4 K 33. 3 K
sg
2. 1 C 10. 2 C 18. 3 C 26. 5 C 34. 3 K
sg
3. 1 C 11. 2 C 19. 3 C 27. 5 C 35. 5 K
sg
4. 1 C 12. 2 C 20. 3 C 28. 6 K 36. 6 C
5. 1 C 13. 2 K 21. 3 C 29. 6 C
6. 1 K 14. 2 K 22. 3 K 30. 6 C
sg
7. 2 K 15. 2 C 23. 3 C 31. 1 K
sg
8. 2 K 16. 3 K 24. 3 C 32. 2 K
Multiple Choice Questions
37. 1 K 62. 3 K 87. 3 C 112. 5 AP 137. 6 C
38. 1 K 63. 3 AP 88. 3 AP 113. 5 C 138. 6 K
39. 1 K 64. 3 C 89. 3 AP 114. 5 K 139. 6 C
40. 1 C 65. 3 C 90. 3 AP 115. 5 C 140. 6 C
41. 1 C 66. 3 K 91. 3 AP 116. 5 K 141. 6 C
42. 1 C 67. 3 C 92. 3 AP 117. 5 C 142. 6 C
43. 2 K 68. 3 C 93. 3 AP 118. 5 K 143. 6 C
44. 2 C 69. 3 C 94. 3 AP 119. 5 AP 144. 6 C
45. 2 C 70. 3 K 95. 3 AP 120. 5 AP 145. 6 C
46. 2 C 71. 3 C 96. 3 AP 121. 5 K 146. 6 C
st
47. 2 C 72. 3 AN 97. 3 AP 122. 5 AP 147. 1 K
sg
48. 2 C 73. 3 C 98. 3 AP 123. 5 K 148. 1 K
st
49. 2 C 74. 3 K 99. 3 AP 124. 5 C 149. 2 K
sg
50. 2 C 75. 3 K 100. 3 AP 125. 5 AP 150. 2 K
st
51. 2 C 76. 3 AP 101. 3 AP 126. 5 C 151. 3 K
sg
52. 2 K 77. 3 AP 102. 3 AP 127. 5 AP 152. 3 AP
st
53. 2 K 78. 3 AP 103. 3 AP 128. 5 AP 153. 4 K
sg
54. 2 K 79. 3 AP 104. 5 AP 129. 5 AP 154. 5 AP
st
55. 2 K 80. 3 AP 105. 3 AP 130. 5 AP 155. 5 K
sg
56. 2 K 81. 3 AP 106. 5 AP 131. 5 AP 156. 5 AP
sg
57. 2 K 82. 3 AP 107. 4 AP 132. 5 AP 157. 6 K
sg
58. 2 K 83. 3 C 108. 4 C 133. 5 AP 158. 6 K
59. 2 C 84. 3 C 109. 4 K 134. 5 AP
60. 2 C 85. 3 K 110. 5 AP 135. 5 AP
61. 2 AP 86. 3 C 111. 5 AP 136. 5 AP
Brief Exercises
159. 3 AP 161. 3 AP 163. 5 AP 165. 5 AP 167. 5 AP
160. 3 AP 162. 3 AP 164. 5 AP 166. 5 AP 168. 5 AP
sg
This question also appears in the Study Guide.
st
This question also appears in a self-test at the student companion website.
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, 20 - 2 Test Bank for Accounting, Fourth Edition
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
Exercises
169. 3 AP 175. 3 AP 181. 3,4 AP 187. 5 AP 193. 5,6 AP
170. 3 AP 176. 3 AP 182. 4 AP 188. 5 C 194. 6 AP
171. 3 AP 177. 3 C 183. 4 AP 189. 5 AP 195. 6 C
172. 3 AP 178. 3 AP 184. 5 AP 190. 5 AP
173. 3 AP 179. 3 AP 185. 5 AP 191. 5 AP
174. 3 AP 180. 3 AP 186. 5 AP 192. 5 AP
Completion Statements
196. 1 K 199. 2 K 202. 2 K 205. 3 K
197. 1 K 200. 2 K 203. 3 K 206. 5 K
198. 2 K 201. 2 K 204. 3 K 207. 6 K
Matching
208. 1 K
Short-Answer Essay
209. 1 K 211. 3 K 213. 3 K
210. 1 K 212. 2 K 214. 3 K
SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Study Objective 1
1. TF 4. TF 31. TF 39. MC 42. MC 196. C 209. SA
2. TF 5. TF 37. MC 40. MC 147. MC 197. C
3. TF 6. TF 38. MC 41. MC 148. MC 208. Ma
Study Objective 2
7. TF 13. TF 45. MC 51. MC 57. MC 150. MC
8. TF 14. TF 46. MC 52. MC 58. MC 198. C
9. TF 15. TF 47. MC 53. MC 59. MC 199. C
10. TF 32. TF 48. MC 54. MC 60. MC 200. C
11. TF 43. MC 49. MC 55. MC 61. MC 201. C
12. TF 44. MC 50. MC 56. MC 149. MC 202. C
Study Objective 3
16. TF 63. MC 75. MC 87. MC 99. MC 170. Ex 203. C
17. TF 64. MC 76. MC 88. MC 100. MC 171. Ex 204. C
18. TF 65. MC 77. MC 89. MC 101. MC 172. Ex 205. C
19. TF 66. MC 78. MC 90. MC 102. MC 173. Ex 210. SA
20. TF 67. MC 79. MC 91. MC 103. MC 174. Ex 213. SA
21. TF 68. MC 80. MC 92. MC 151. MC 175. Ex 214. SA
22. TF 69. MC 81. MC 93. MC 152. MC 176. Ex
23. TF 70. MC 82. MC 94. MC 159. BE 177. Ex
24. TF 71. MC 83. MC 95. MC 160. BE 178. Ex
33. TF 72. MC 84. MC 96. MC 161. BE 179. Ex
34. TF 73. MC 85. MC 97. MC 162. BE 180. Ex
62. MC 74. MC 86. MC 98. MC 169. Ex 181. Ex
FOR INSTRUCTOR USE ONLY
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, Budgetary Planning 20 - 3
Study Objective 4
25. TF 108. MC 153. MC 182. Ex
107. MC 109. MC 181. Ex 183. Ex
Study Objective 5
26. TF 113. MC 121. MC 129. MC 154. MC 168. BE 189. Ex
27. TF 114. MC 122. MC 130. MC 155. MC 182. Ex 190. Ex
35. TF 115. MC 123. MC 131. MC 156. MC 183. Ex 191. Ex
104. MC 116. MC 124. MC 132. MC 163. BE 184. Ex 192. Ex
106. MC 117. MC 125. MC 133. MC 164. BE 185. Ex 193. Ex
110. MC 118. MC 126. MC 134. MC 165. BE 186. Ex 206. C
111. MC 119. MC 127. MC 135. MC 166. BE 187. Ex
112. MC 120. MC 128. MC 136. MC 167. BE 188. Ex
Study Objective 6
28. TF 36. TF 139. MC 142. MC 145. MC 158. MC 195. Ex
29. TF 137. MC 140. MC 143. MC 146. MC 193. Ex 207. C
30. TF 138. MC 141. MC 144. MC 157. MC 194. Ex
Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice Ex = Exercise Ma = Matching
SA = Short-Answer Essay
CHAPTER STUDY OBJECTIVES
1. Identify the benefits of budgeting. 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.
2. State the essentials of effective budgeting. The essentials of effective budgeting are (a)
sound organizational structure, (b) research and analysis, and (c) acceptance by all levels of
management.
3. Identify the budgets that comprise the master budget. The master budget consists of the
following budgets: (a) sales, (b) production, (c) direct materials, (d) direct labor, (e) manu-
facturing overhead, (f) selling and administrative expense, (g) budgeted income statement, (h)
capital expenditure budget, (i) cash budget, and (j) budgeted balance sheet.
4. Describe the sources for preparing the budgeted income statement. The budgeted
income statement is prepared from (a) the sales budget, (b) the budgets for direct materials,
direct labor, and manufacturing overhead, and (c) the selling and administrative expense
budget.
5. Explain the principal sections of a cash budget. The cash budget has three sections
(receipts, disbursements, and financing) and the beginning and ending cash balances.
6. Indicate the applicability of budgeting in nonmanufacturing companies. Budgeting may
be used by merchandisers for development of a merchandise purchases budget. In service
enterprises budgeting is a critical factor in coordinating staff needs with anticipated services. In
not-for-profit organizations, the starting point in budgeting is usually expenditures, not receipts.
FOR INSTRUCTOR USE ONLY
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, 20 - 4 Test Bank for Accounting, Fourth Edition
TRUE-FALSE STATEMENTS
1. Budgets are statements of management's plans stated in financial terms.
Ans: T, SO: 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, SO: 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, SO: 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, SO: 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, SO: 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, SO: 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, SO: 2, 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, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: Budget Preparation
9. 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, SO: 2, 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, SO: 2, 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, SO: 2, 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, SO: 2, 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, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC:
Problem Solving, IMA: Budget Preparation
FOR INSTRUCTOR USE ONLY
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BUDGETARY PLANNING
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
Item SO BT Item SO BT Item SO BT Item SO BT Item SO BT
True-False Statements
sg
1. 1 K 9. 2 C 17. 3 K 25. 4 K 33. 3 K
sg
2. 1 C 10. 2 C 18. 3 C 26. 5 C 34. 3 K
sg
3. 1 C 11. 2 C 19. 3 C 27. 5 C 35. 5 K
sg
4. 1 C 12. 2 C 20. 3 C 28. 6 K 36. 6 C
5. 1 C 13. 2 K 21. 3 C 29. 6 C
6. 1 K 14. 2 K 22. 3 K 30. 6 C
sg
7. 2 K 15. 2 C 23. 3 C 31. 1 K
sg
8. 2 K 16. 3 K 24. 3 C 32. 2 K
Multiple Choice Questions
37. 1 K 62. 3 K 87. 3 C 112. 5 AP 137. 6 C
38. 1 K 63. 3 AP 88. 3 AP 113. 5 C 138. 6 K
39. 1 K 64. 3 C 89. 3 AP 114. 5 K 139. 6 C
40. 1 C 65. 3 C 90. 3 AP 115. 5 C 140. 6 C
41. 1 C 66. 3 K 91. 3 AP 116. 5 K 141. 6 C
42. 1 C 67. 3 C 92. 3 AP 117. 5 C 142. 6 C
43. 2 K 68. 3 C 93. 3 AP 118. 5 K 143. 6 C
44. 2 C 69. 3 C 94. 3 AP 119. 5 AP 144. 6 C
45. 2 C 70. 3 K 95. 3 AP 120. 5 AP 145. 6 C
46. 2 C 71. 3 C 96. 3 AP 121. 5 K 146. 6 C
st
47. 2 C 72. 3 AN 97. 3 AP 122. 5 AP 147. 1 K
sg
48. 2 C 73. 3 C 98. 3 AP 123. 5 K 148. 1 K
st
49. 2 C 74. 3 K 99. 3 AP 124. 5 C 149. 2 K
sg
50. 2 C 75. 3 K 100. 3 AP 125. 5 AP 150. 2 K
st
51. 2 C 76. 3 AP 101. 3 AP 126. 5 C 151. 3 K
sg
52. 2 K 77. 3 AP 102. 3 AP 127. 5 AP 152. 3 AP
st
53. 2 K 78. 3 AP 103. 3 AP 128. 5 AP 153. 4 K
sg
54. 2 K 79. 3 AP 104. 5 AP 129. 5 AP 154. 5 AP
st
55. 2 K 80. 3 AP 105. 3 AP 130. 5 AP 155. 5 K
sg
56. 2 K 81. 3 AP 106. 5 AP 131. 5 AP 156. 5 AP
sg
57. 2 K 82. 3 AP 107. 4 AP 132. 5 AP 157. 6 K
sg
58. 2 K 83. 3 C 108. 4 C 133. 5 AP 158. 6 K
59. 2 C 84. 3 C 109. 4 K 134. 5 AP
60. 2 C 85. 3 K 110. 5 AP 135. 5 AP
61. 2 AP 86. 3 C 111. 5 AP 136. 5 AP
Brief Exercises
159. 3 AP 161. 3 AP 163. 5 AP 165. 5 AP 167. 5 AP
160. 3 AP 162. 3 AP 164. 5 AP 166. 5 AP 168. 5 AP
sg
This question also appears in the Study Guide.
st
This question also appears in a self-test at the student companion website.
PDF created with pdfFactory Pro trial version www.pdffactory.com
, 20 - 2 Test Bank for Accounting, Fourth Edition
SUMMARY OF QUESTIONS BY STUDY OBJECTIVES AND BLOOM’S TAXONOMY
Exercises
169. 3 AP 175. 3 AP 181. 3,4 AP 187. 5 AP 193. 5,6 AP
170. 3 AP 176. 3 AP 182. 4 AP 188. 5 C 194. 6 AP
171. 3 AP 177. 3 C 183. 4 AP 189. 5 AP 195. 6 C
172. 3 AP 178. 3 AP 184. 5 AP 190. 5 AP
173. 3 AP 179. 3 AP 185. 5 AP 191. 5 AP
174. 3 AP 180. 3 AP 186. 5 AP 192. 5 AP
Completion Statements
196. 1 K 199. 2 K 202. 2 K 205. 3 K
197. 1 K 200. 2 K 203. 3 K 206. 5 K
198. 2 K 201. 2 K 204. 3 K 207. 6 K
Matching
208. 1 K
Short-Answer Essay
209. 1 K 211. 3 K 213. 3 K
210. 1 K 212. 2 K 214. 3 K
SUMMARY OF STUDY OBJECTIVES BY QUESTION TYPE
Item Type Item Type Item Type Item Type Item Type Item Type Item Type
Study Objective 1
1. TF 4. TF 31. TF 39. MC 42. MC 196. C 209. SA
2. TF 5. TF 37. MC 40. MC 147. MC 197. C
3. TF 6. TF 38. MC 41. MC 148. MC 208. Ma
Study Objective 2
7. TF 13. TF 45. MC 51. MC 57. MC 150. MC
8. TF 14. TF 46. MC 52. MC 58. MC 198. C
9. TF 15. TF 47. MC 53. MC 59. MC 199. C
10. TF 32. TF 48. MC 54. MC 60. MC 200. C
11. TF 43. MC 49. MC 55. MC 61. MC 201. C
12. TF 44. MC 50. MC 56. MC 149. MC 202. C
Study Objective 3
16. TF 63. MC 75. MC 87. MC 99. MC 170. Ex 203. C
17. TF 64. MC 76. MC 88. MC 100. MC 171. Ex 204. C
18. TF 65. MC 77. MC 89. MC 101. MC 172. Ex 205. C
19. TF 66. MC 78. MC 90. MC 102. MC 173. Ex 210. SA
20. TF 67. MC 79. MC 91. MC 103. MC 174. Ex 213. SA
21. TF 68. MC 80. MC 92. MC 151. MC 175. Ex 214. SA
22. TF 69. MC 81. MC 93. MC 152. MC 176. Ex
23. TF 70. MC 82. MC 94. MC 159. BE 177. Ex
24. TF 71. MC 83. MC 95. MC 160. BE 178. Ex
33. TF 72. MC 84. MC 96. MC 161. BE 179. Ex
34. TF 73. MC 85. MC 97. MC 162. BE 180. Ex
62. MC 74. MC 86. MC 98. MC 169. Ex 181. Ex
FOR INSTRUCTOR USE ONLY
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, Budgetary Planning 20 - 3
Study Objective 4
25. TF 108. MC 153. MC 182. Ex
107. MC 109. MC 181. Ex 183. Ex
Study Objective 5
26. TF 113. MC 121. MC 129. MC 154. MC 168. BE 189. Ex
27. TF 114. MC 122. MC 130. MC 155. MC 182. Ex 190. Ex
35. TF 115. MC 123. MC 131. MC 156. MC 183. Ex 191. Ex
104. MC 116. MC 124. MC 132. MC 163. BE 184. Ex 192. Ex
106. MC 117. MC 125. MC 133. MC 164. BE 185. Ex 193. Ex
110. MC 118. MC 126. MC 134. MC 165. BE 186. Ex 206. C
111. MC 119. MC 127. MC 135. MC 166. BE 187. Ex
112. MC 120. MC 128. MC 136. MC 167. BE 188. Ex
Study Objective 6
28. TF 36. TF 139. MC 142. MC 145. MC 158. MC 195. Ex
29. TF 137. MC 140. MC 143. MC 146. MC 193. Ex 207. C
30. TF 138. MC 141. MC 144. MC 157. MC 194. Ex
Note: TF = True-False BE = Brief Exercise C = Completion
MC = Multiple Choice Ex = Exercise Ma = Matching
SA = Short-Answer Essay
CHAPTER STUDY OBJECTIVES
1. Identify the benefits of budgeting. 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.
2. State the essentials of effective budgeting. The essentials of effective budgeting are (a)
sound organizational structure, (b) research and analysis, and (c) acceptance by all levels of
management.
3. Identify the budgets that comprise the master budget. The master budget consists of the
following budgets: (a) sales, (b) production, (c) direct materials, (d) direct labor, (e) manu-
facturing overhead, (f) selling and administrative expense, (g) budgeted income statement, (h)
capital expenditure budget, (i) cash budget, and (j) budgeted balance sheet.
4. Describe the sources for preparing the budgeted income statement. The budgeted
income statement is prepared from (a) the sales budget, (b) the budgets for direct materials,
direct labor, and manufacturing overhead, and (c) the selling and administrative expense
budget.
5. Explain the principal sections of a cash budget. The cash budget has three sections
(receipts, disbursements, and financing) and the beginning and ending cash balances.
6. Indicate the applicability of budgeting in nonmanufacturing companies. Budgeting may
be used by merchandisers for development of a merchandise purchases budget. In service
enterprises budgeting is a critical factor in coordinating staff needs with anticipated services. In
not-for-profit organizations, the starting point in budgeting is usually expenditures, not receipts.
FOR INSTRUCTOR USE ONLY
PDF created with pdfFactory Pro trial version www.pdffactory.com
, 20 - 4 Test Bank for Accounting, Fourth Edition
TRUE-FALSE STATEMENTS
1. Budgets are statements of management's plans stated in financial terms.
Ans: T, SO: 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, SO: 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, SO: 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, SO: 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, SO: 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, SO: 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, SO: 2, 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, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Measurement, AICPA PC: Problem
Solving, IMA: Budget Preparation
9. 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, SO: 2, 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, SO: 2, 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, SO: 2, 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, SO: 2, 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, SO: 2, Bloom: K, Difficulty: Easy, Min: 1, AACSB: None, AICPA BB: Strategic/Critical Thinking, AICPA FN: Decision Modeling, AICPA PC:
Problem Solving, IMA: Budget Preparation
FOR INSTRUCTOR USE ONLY
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