Multiple Choices:

25. A budget that adds a new month when the current month ends is called a:
A) Capital budget.
B) Master budget.
C) Rolling budget.
D) There is no such budget.
Answer: C

26. The benefits of budgeting include all of the following except:

A) Enabling the company to produce more for less cost.
B) Assigning responsibility for situations that require corrective action.
C) Coordinating activities between departments within the organization.
D) Creating standards for evaluating
performance. Answer: A

27. A master budget usually includes all of the following except:

A) A sales forecast.
B) A cash budget.
C) A projected tax return.
D) Projected financial
statements. Answer: C

28. A master budget can be used as a(n):

A) Aid to planning.
B) Evaluation tool.
C) Means to coordinate activities.
D) All of the above.
Answer: D

31. Which of the following is not a benefit of a careful and thorough budgeting process?
A) Budgeting increases management's awareness of the company's external economic environment.
B) Budgeted net income assures the company of operating profitably.
C) The budget may provide advance warning of pending problems.
D) Budgets provide a yardstick for evaluating future
performance. Answer: B
35. When budgeted amounts are set at reasonable and achievable levels:
A) They reflect a "total quality management" philosophy of management.
B) A highly efficient department should fall slightly short of budget standards.
C) Meeting the budgeted amounts ensures a maximum level of profitability.
D) Failure to stay within the budget is viewed as an unacceptable level of
performance. Answer: D

36. A segment of a master budget relating to that portion of a business under the control of a
particular manager is termed a:
A) Performance report.
B) Production report.
C) Responsibility budget.
D) Cash
budget.
Answer: C

37. Which of the following is not considered an operating budget?

A) Manufacturing cost budget.
B) Production schedule.
C) Capital expenditures budget.
D) Sales
forecast.
Answer: C

38. Which element of a master budget would normally be prepared first?

A) A production budget.
B) A cash budget.
C) A budget of operating expenses.
D) A sales
forecast.
Answer: D

39. Which of the following is a major component of a master budget?

A) A production throughput schedule.
B) A machinery maintenance schedule.
C) A manufacturing cost budget.
D) An employee training
budget. Answer: C

40. Which of the following is considered an operating budget estimate?

A) The prepayments budget.
B) The debt service budget.
C) The manufacturing cost budget.
D) The capital expenditures
budget. Answer: C