ACNT 2402Chapter 07 - Study Guide Questions and Answers(2022/2023)

Chapter 07 -- Master Budgeting – Study Guide 1. The cash budget is usually prepared after the budgeted income statement. FALSE 2. The manufacturing overhead budget is typically prepared before the production budget. FALSE 3. Self-imposed budgets prepared by lower-level managers should be scrutinized by higher levels of management. TRUE 4. The basic idea underlying responsibility accounting is that each manager should be held responsible for the overall profit of the company to ensure that all managers are acting together. FALSE 5. Budgets are used to plan and to control operations. TRUE 6. The sales budget is usually prepared before the production budget. TRUE 7. A continuous or perpetual budget is a budget that almost never needs to be revised. FALSE 8. A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels. TRUE 9. The sales budget often includes a schedule of expected cash collections. TRUE Page 2 of 21 10. When preparing a direct materials budget, the units of raw material needed to meet production should be added to desired ending inventory and the beginning inventory for raw materials should be subtracted to determine the amount of raw materials to be purchased. TRUE 11. In companies that do not have "no lay-off" policies, the total direct labor cost for a budget period is computed by multiplying the total direct labor hours needed to make the budgeted output of completed units by the direct labor wage rate. TRUE 12. Both variable and fixed manufacturing overhead costs are included in the selling and administrative expense budget. FALSE 13. On a cash budget, the total amount of budgeted cash payments for manufacturing overhead should not include any amounts for depreciation on factory equipment. TRUE 14. Which of the following budgets are prepared before the production budget? Direct Materials Budget Sales Budget A) Yes Yes B) Yes No C) No Yes D) No No A. Option A B. Option