Chapter 6 Master Budget and Responsibility Accounting

Chapter 6 Master Budget and Responsibility Accounting

Objective 6.1

1) A budget:
A) is the quantitative expression of a proposed plan of action by management
B) is an aid to coordinate what needs to be done
C) generally includes both financial and nonfinancial aspects of the plan
D) All of the above are correct.
Answer: D
Diff: 1
Terms: budget
Objective: 1
AACSB: Reflective thinking

2) A budget
A) is the quantitative expression of a proposed plan of action.
B) aids in coordinating what needs to be done.
C) includes both financial and nonfinancial aspects.
D) All of these answers are correct.
Answer: D
Diff: 1
Terms: budget
Objective: 1
AACSB: Reflective thinking

3) Budgeting is used to help companies:
A) plan to better satisfy customers
B) anticipate potential problems
C) focus on opportunities
D) All of these answers are correct.
Answer: D
Diff: 2
Terms: master budget
Objective: 1
AACSB: Communication

4) A master budget:
A) includes only financial aspects of a plan and excludes nonfinancial aspects
B) is an aid to coordinating what needs to be done to implement a plan
C) includes broad expectations and visionary results
D) should not be altered after it has been agreed upon
Answer: B
Diff: 2
Terms: master budget
Objective: 1
AACSB: Reflective thinking

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,5) Operating decisions primarily deal with:
A) the use of scarce resources
B) how to obtain funds to acquire resources
C) acquiring equipment and buildings
D) satisfying stockholders
Answer: A
Diff: 2
Terms: operating budget
Objective: 1
AACSB: Reflective thinking

6) Financing decisions primarily deal with:
A) the use of scarce resources
B) how to obtain funds to acquire resources
C) acquiring equipment and buildings
D) preparing financial statements for stockholders
Answer: B
Diff: 2
Terms: financial budget
Objective: 1
AACSB: Reflective thinking

7) Budgeting provides all of the following EXCEPT:
A) a means to communicate the organization's short-term goals to its members
B) support for the management functions of planning and coordination
C) a means to anticipate problems
D) an ethical framework for decision making
Answer: D
Diff: 2
Terms: master budget
Objective: 1
AACSB: Communication

8) If initial budgets prove UNACCEPTABLE, planners achieve the most benefit from:
A) planning again in light of feedback and current conditions
B) deciding not to budget this year
C) accepting an unbalanced budget
D) using last year's budget
Answer: A
Diff: 2
Terms: master budget
Objective: 1
AACSB: Communication




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,9) Operating budgets and financial budgets:
A) combined form the master budget
B) are prepared before the master budget
C) are prepared after the master budget
D) have nothing to do with the master budget
Answer: A
Diff: 1
Terms: operating budget, financial budget, master budget
Objective: 1
AACSB: Reflective thinking

10) A good budgeting system forces managers to examine the business as they plan, so they can:
A) detect inaccurate historical records
B) set specific expectations against which actual results can be compared
C) complete the budgeting task on time
D) get promoted for doing a good job
Answer: B
Diff: 2
Terms: master budget
Objective: 1
AACSB: Communication

11) A budget is the quantitative expression of a proposed plan of action by management
for a specified period.
Answer: TRUE
Diff: 1
Terms: budget
Objective: 1
AACSB: Analytical skills

12) A budget generally includes both financial and nonfinancial aspects of the
plan.
Answer: TRUE
Diff: 1
Terms: budget
Objective: 1
AACSB: Communication

13) Budgeted financial statements are also referred to as pro forma statements.
Answer: TRUE
Diff: 1
Terms: financial budget
Objective: 1
AACSB: Reflective thinking




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, 14) Budgeting includes only the financial aspects of the plan and NOT any nonfinancial aspects such as
the number of physical units manufactured.
Answer: FALSE
Explanation: Budgeting includes both financial and nonfinancial aspects of the plan.
Diff: 2
Terms: financial budget
Objective: 1
AACSB: Reflective thinking

15) Budgeting helps management anticipate and adjust for trouble spots in advance.
Answer: TRUE
Diff: 1
Terms: budget
Objective: 1
AACSB: Reflective thinking

16) Budgets can play both planning and control roles for management.
Answer: TRUE
Diff: 1
Terms: budget
Objective: 1
AACSB: Reflective thinking

17) Long-run planning and short-run planning are best performed independently of each other.
Answer: FALSE
Explanation: Long-run planning and short-run planning are best performed as a part of an overall
strategic planning process since they influence each other.
Diff: 2
Terms: planning
Objective: 1
AACSB: Reflective thinking

18) Financing decisions deal with how to best use the limited resources of an organization.
Answer: FALSE
Explanation: Financing decisions deal with how to obtain the funds to acquire those resources.
Diff: 2
Terms: master budget
Objective: 1
AACSB: Ethical reasoning

19) Operating decisions deal with how to obtain the funds to acquire resources.
Answer: FALSE
Explanation: Financing decisions deal with obtaining funds.
Diff: 2
Terms: master budget
Objective: 1
AACSB: Ethical reasoning




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