COST ACCOUNTING MIDTERM 2 Questions and
Answers Updated 2026
Chapters 6-10
# Term Definition
1 The Operating Budget and the Financing Budget
What are the two parts of the master
budget
2 What makes up the financial budget
the capital expenditures budget, the cash budget, the
budgeted balance sheet, and the bud- geted statement
of cash flows
3 What is a cash budget?
The cash budget is a schedule of expected cash receipts
and disbursements. It predicts the effects on the cash
position at the given level of operations.
4
What are the four parts of a cash Cash available for needs Cash disbursements Financing
budget? effects Ending Cash Balance
5 What is a budget?
A budget is (a) the quantitative expression of a proposed
plan of action by management for a specified period and
(b) an aid to coordinate what needs to be done to
implement that plan.
6 What is a rolling budget?
A rolling budget, also called a continuous budget, is a
budget that is always available for a specified future
period. It is created by continually adding a month,
quarter, or year to the period that just ended.
7
the budgeted income statement and its supporting
What makes up the operating budget?
budget schedules
8 What is activity based budgeting?
Activity-based budgeting (ABB) focuses on the budgeted
cost of the activities necessary to produce and sell
products and services.
, 9 What is Kaizen Budgeting?
Kaizen budgeting explicitly incorporates continuous
improvement anticipated during the budget period into
the budget numbers.
10 What is a variance?
A variance is the difference between actual results and
expected performance.
# Term Definition
11 What is the static budget?
The static budget, or master budget, is based on the level
of output planned at the start of the budget period.
12 What is the static budget variance?
The static-budget variance is the difference between the
actual result and the corresponding budgeted amount in
the static budget.
13 What is a favorable variance?
A favorable variance has the effect, when considered in
isolation, of increasing operating income relative to the
budgeted amount.
14 What is an unfavorable variance?
An unfavorable variance has the effect, when viewed in
isolation, of decreasing operating income relative to the
budgeted amount.
15 What is a flexible budget?
A flexible budget calculates budgeted revenues and
budgeted costs based on the actual output in the budget
period.
16 The flexible budget is prepared at the end of the period
At what point of the operating period is
the flexible budget prepared?
17 hypothetical
The flexible budget is a ___________
budget
Answers Updated 2026
Chapters 6-10
# Term Definition
1 The Operating Budget and the Financing Budget
What are the two parts of the master
budget
2 What makes up the financial budget
the capital expenditures budget, the cash budget, the
budgeted balance sheet, and the bud- geted statement
of cash flows
3 What is a cash budget?
The cash budget is a schedule of expected cash receipts
and disbursements. It predicts the effects on the cash
position at the given level of operations.
4
What are the four parts of a cash Cash available for needs Cash disbursements Financing
budget? effects Ending Cash Balance
5 What is a budget?
A budget is (a) the quantitative expression of a proposed
plan of action by management for a specified period and
(b) an aid to coordinate what needs to be done to
implement that plan.
6 What is a rolling budget?
A rolling budget, also called a continuous budget, is a
budget that is always available for a specified future
period. It is created by continually adding a month,
quarter, or year to the period that just ended.
7
the budgeted income statement and its supporting
What makes up the operating budget?
budget schedules
8 What is activity based budgeting?
Activity-based budgeting (ABB) focuses on the budgeted
cost of the activities necessary to produce and sell
products and services.
, 9 What is Kaizen Budgeting?
Kaizen budgeting explicitly incorporates continuous
improvement anticipated during the budget period into
the budget numbers.
10 What is a variance?
A variance is the difference between actual results and
expected performance.
# Term Definition
11 What is the static budget?
The static budget, or master budget, is based on the level
of output planned at the start of the budget period.
12 What is the static budget variance?
The static-budget variance is the difference between the
actual result and the corresponding budgeted amount in
the static budget.
13 What is a favorable variance?
A favorable variance has the effect, when considered in
isolation, of increasing operating income relative to the
budgeted amount.
14 What is an unfavorable variance?
An unfavorable variance has the effect, when viewed in
isolation, of decreasing operating income relative to the
budgeted amount.
15 What is a flexible budget?
A flexible budget calculates budgeted revenues and
budgeted costs based on the actual output in the budget
period.
16 The flexible budget is prepared at the end of the period
At what point of the operating period is
the flexible budget prepared?
17 hypothetical
The flexible budget is a ___________
budget
