Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

Question 1
Which of the following correctly describes the cost of goods sold (COGS) formula?

A. The traditional COGS formula begins with direct materials purchases, which is adjusted by
subtracting beginning and adding ending direct materials inventory to compute the cost of
direct materials used in production. This cost is combined with direct labor and manufacturing
overhead costs used in production. The total production costs (i.e., total manufacturing costs)
are adjusted by subtracting beginning and adding ending finished goods inventory to determine
the COGS computation.
B. The traditional COGS formula begins with direct materials purchases, which is adjusted by
adding beginning and adding ending direct materials inventory to compute the cost of direct
materials used in production. This cost is combined with direct labor and manufacturing
overhead costs used in production. The total production costs (i.e., total manufacturing costs)
are adjusted by adding beginning and adding ending finished goods inventory to determine the
COGS computation.
C. The traditional COGS formula begins with direct materials purchases, which is adjusted by
subtracting beginning and subtracting ending direct materials inventory to compute the cost of
direct materials used in production. This cost is combined with direct labor and manufacturing
overhead costs used in production. The total production costs (i.e., total manufacturing costs)
are adjusted by subtracting beginning and subtracting ending finished goods inventory to
determine the COGS computation.
D. The traditional COGS formula begins with direct materials purchases, which is adjusted by
adding beginning and subtracting ending direct materials inventory to compute the cost of
direct materials used in production. This cost is combined with direct labor and manufacturing
overhead costs used in production. The total production costs (i.e., total manufacturing costs)
are adjusted by adding beginning and subtracting ending finished goods inventory to determine
the COGS computation.

Question 2
Controllable costs for responsibility accounting purposes are those costs that are directly influenced by
which of the following?

A. A specific manager within a specific period of time

B. A change in activity
C. Production volume
D. Sales volume

Question 3
Which of the following is correct concerning participative standards?

A. Employees tend to resent participative standards more than authoritative standards.

B. Participative standards tend to be established more quickly than authoritative standards.
C. Participative standards tend to be less closely matched to company goals than authoritative
standards.
D. Participative standards tend to improve employee motivation less than authoritative standards.
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

Question 4
This year, a company reports poor sales because of a new and inexperienced sales force. If this year's
sales data is used to set next year's sales budget, which of the following would be the most likely result?

A. The budget would be set too low, and the sales force would be less motivated to achieve those
goals.
B. The budget would be set too high, and the sales force would be less motivated to achieve those
goals.
C. The budget would be set too high, and the sales force would be motivated to achieve those
goals.
D. The budget would be set too low, and the sales force would be less motivated to surpass those
goals.

Question 5
Which of the following statements is correct concerning the cash budget?

A. Increasing the time a company takes to pay for credit purchases from 30 days to 45 days would
increase expected cash receipts in a cash budget.
B. Increasing the time a company takes to pay for credit purchases from 30 days to 45 days would
increase expected cash disbursements in a cash budget.
C. Increasing the time a company takes to pay for credit purchases from 30 days to 45 days would
decrease expected cash receipts in a cash budget.
D. Increasing the time a company takes to pay for credit purchases from 30 days to 45 days would
decrease expected cash disbursements in a cash budget.

Question 6
Which one of the following factors may influence financial forecasts in the future:

A. like-kind exchange of equipment today.

B. current year's wages.
C. last year's production level.
D. pending litigation against the organization.

Question 7
Which of the following refers to a quantitative expression of proposed management actions for a set
period of time?

A. Budgets.
B. Cost of goods manufactured statements.
C. Cost of goods sold statements.
D. Financial statements.

Question 8
Thomas Corp is developing a standard cost sheet to specify the standard price and standard quantity of
direct labor used to build a single widget. Which of the following includes the proper steps to be taken in
developing the standard quantity of direct labor used to build a single widget?
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

A. Calculate the time taken to produce a single widget, adjust for direct material handling expense,
adjust for expected downtime, and adjust for normal rejected units.
B. Calculate the time taken to produce a single widget, adjust for scheduled breaks, adjust for
direct material handling expense, adjust for expected downtime, and adjust for normal rejected
units.
C. Calculate the time taken to produce a single widget, adjust for scheduled breaks, adjust for
expected downtime, and adjust for normal rejected units.
D. Calculate the time taken to produce a single widget, adjust for expected downtime, and adjust
for normal rejected units.

Question 9
Health Foods Inc. has decided to start a cash budgeting program to improve overall cash management.
Information gathered from the past year reveals the following cash collection trends:

 40% of sales are on credit

 50% of credit sales are collected in month of sale
 30% of credit sales are collected first month after sale
 15% of credit sales are collected second month after sale
 5% of credit sales result in bad debts

Gross sales for the last five months were as follows.

Sales for June are projected to be $255,000. Based on this information, the expected cash receipts for
March would be:

A. $242,000.
B. $230,000.
C. $305,000.
D. $92,000.

Question 10
The personnel manager of Martin Power Inc. does not consider equipment downtime and worker breaks
during the determination of standard costs for direct labor. Evaluate the effect of the manager's action.

A. The labor efficiency variance will be higher.

B. The labor rate variance will be higher.
C. The number of defective units will increase.
D. The quality of products will improve.

Question 11
The production manager of Brian Matthews Group has received an urgent order of additional 10,000
units from a regular customer. To fulfill the order, the employees need to work overtime. The overtime
wages will be 150% of the usual hourly wage rate. However, the personnel manager is not in favor of
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

allowing overtime because this will use up too much of the budgeted wages for the quarter. Which of
the following alternatives will most likely undermine the personnel manager's argument?

A. The personnel manager should not allow overtime as the actual wages will increase the
budgeted wages.
B. The personnel manager should allow overtime to avoid losing its regular customer.
C. The production manager should provide the extra units to the customer by postponing other
less urgent orders.
D. The production manager should not accept the order for extra units as this will affect the
current personnel budget.

Question 12
Which one of the following items is the last schedule to be prepared in the normal budget preparation
process?

A. Selling expense budget.

B. Cost of goods sold budget.
C. Manufacturing overhead budget.
D. Cash budget.

Question 13
Which one of the following best describes tactical profit plans?

A. Broad, long-term, broad responsibilities, qualitative.

B. Detailed, short-term, broad responsibilities, qualitative.
C. Broad, short-term, responsibilities at all levels, quantitative.
D. Detailed, short-term, responsibilities at all levels, quantitative.

Question 14
Which of the following is not a quality of a direct labor budget?

A. A direct labor budget can smooth out production over the year to keep work force size
consistent.
B. A direct labor budget allows firms with unions to notify the union before changes are needed.
C. A direct labor budget can be broken down into fixed and variable direct labor.
D. A direct labor budget can be broken down by categories such as semiskilled, unskilled, and
skilled.

Question 15
A managerial accounting team is working with a production manager to determine the cause of
unexpected production delays. Based on the analysis, the manager is able to revise the production
process, thus avoiding future delays. This is an example of how managerial accounting does which of the
following?

A. Ensures compliance with GAAP

B. Helps a manager control the company
C. Helps the company meet legal requirements
D. Assists with financial reporting
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

Question 16
Joan K. is a manager with Steel Works Inc. Joan would love to beat the budget this year. She believes
that revenues for the coming year will be $200,000 and expenses will be $120,000. To build in budgetary
slack, Joan is least likely to budget for which of the following?

A. $130,000 of expenses
B. $190,000 of revenue
C. $70,000 of income
D. $110,000 of expenses

Question 17
How is strategic analysis related to budget development?

A. Strategic analysis establishes targets for all departments and lists the methods to achieve them.
B. Strategic analysis provides a detailed and precise estimate about the future which helps an
organization accurately determine resource requirements.
C. Strategic analysis matches the capabilities of an organization with available marketplace
opportunities to determine the goals of objectives for a particular period.
D. Strategic analysis determines the overall financial requirements of an organization and also
helps to procure funds at a lower cost.

Question 18
Which costs should managers be held responsible for and evaluated on their ability to manage?

A. All costs because managers should be responsible to help accurately plan all costs.
B. Only variable costs because these costs vary with the amount of units produced.
C. Only critical costs because these are the most important costs to the organization.
D. Only controllable costs; otherwise, managers may have incentive to build slack into cost
estimates.

Question 19
A company that manufactures furniture is establishing its budget for the upcoming year. All of the
following items would appear in the overhead budget except for the:

A. overtime paid to the workers who perform production scheduling.

B. fringe benefits paid to the production supervisor.
C. freight charges paid for the delivery of raw materials to the company.
D. cost of glue used to secure the attachment of the legs to the tables.

Question 20
Which one of the following best describes the order in which budgets should be prepared when
developing the annual master operating budget?

A. Revenue budget, production budget, direct material budget.

B. Revenue budget, direct material budget, production budget.
C. Production budget, direct material budget, revenue budget.
D. Production budget, revenue budget, direct material budget.
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

Question 21
Given the following information for Every Tool's line of wrenches, create the budgeted operating
statement and the budgeted contribution margin statement. Then reconcile the difference between the
two statements. What is the reconciled difference? Note that Every Tool sells each wrench for $15.00.

A. There is no difference between the two statements.

B. $1,000
C. $500
D. $1,640

Question 22
Fluffy, Inc. (Fluffy) makes and sells two kinds of marshmallows: regular and jumbo. The third-quarter
production budget for each of the marshmallows is as follows:

From experience, Fluffy's management knows that it takes approximately 12 minutes to make a bag of
regular marshmallows and 6 minutes to make a bag of jumbo marshmallows. Fluffy pays its direct labor
employees $18 per hour. Using a direct labor budget, calculate the direct labor payroll for the two
products for July, August, and September.

A. $12,330 for July, $14,850 for August, and $17,496 for September
B. $4,806 for July, $5,814 for August, and $5,310 for September
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

C. $17,136 for July, $20,664 for August, and $22,806 for September
D. $15,777 for July, $19,053 for August, and $19,368 for September

Question 23
Thomas Corp is developing a standard cost sheet to specify the standard price and standard quantity of
direct material used to build a single widget. Which of the following includes the proper steps to be
taken in developing the standard price for a standard amount of direct material?

A. The price of a standard amount of direct material, adjust for costs of receiving the direct
material, and adjust for the costs of preparing the direct material for production.
B. The price of a standard amount of direct material, adjust for costs of receiving the direct
material, adjust for the costs of preparing the direct material for production, and adjust for the
hourly direct labor costs of assembling the widget.
C. The price of a standard amount of direct material and adjust for the costs of preparing the direct
material for production.
D. The price of a standard amount of direct material, adjust for the costs of preparing the direct
material for production, and adjust for the hourly direct labor costs of assembling the widget.

Question 24
Which of the following statements concerning establishing standards is true?

A. Using historical data to establish standards is typically more difficult than using activity analysis
to establish them.
B. Using historical data to establish standards is typically more expensive than using activity
analysis to establish them.
C. Using historical data to establish standards is typically less accurate than using activity analysis
to establish them.
D. Using historical data to establish standards is typically more time-consuming than using activity
analysis to establish them.

Question 25
Which of the following is not correct concerning controllable costs?

A. Another name for a controllable cost is a discretionary cost.

B. A manager should be evaluated based on uncontrollable costs.
C. A cost is controllable if a manager or other decision-maker can change the amount spent on the
item in a short period of time.
D. Variable costs are typically controllable costs.

Question 26
Assume it is January 1. A firm had sales of $30,000 and $32,000 in the previous November and
December, respectively. Projected sales for January are $38,000. Past collection patterns indicate that
50% of sales are cash sales. 10% of credit sales are typically collected in the same month as the sale; 80%
are collected the month following the sale and 10% are collected two months after the month of the
sale. How much money is expected to be collected in January?

A. $35,200.
B. $20,900.
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

C. $51,400.
D. $49,500.

Question 27
Sewing Masters produces curtains and sells each curtain for $40. Sewing Masters often sees a spike in
sales in March and April due to spring cleaning. The company plans to sell 257,000 curtains in the month
of April. At the end of March, it expects to have 52,000 curtains in inventory, and it would like to have
15,000 curtains in inventory at the end of April. What is the company's budgeted sales revenue for
April?

A. $8,800,000
B. $11,760,000
C. $10,280,000
D. $9,680,000

Question 28
Francisco Corp. is in the business of manufacturing plastic bottles. In the current quarter, $100,000 was
provided for materials procurement and 10,000bottles were produced against a budgeted production of
8,500 bottles. However, the extra production of 1,500 bottles had to be sold immediately at a price
lower than the market price. Identify the most likely flaw in the budget prepared by Francisco Corp.
which led to a sale at lower prices.

A. The sale price was overestimated.

B. The storage capacity required was underestimated.
C. The funds allocated were not adequate.
D. The production capacity was underestimated.

Question 29
Tim's Toys, a maker of high-end collectible teddy bears, had a beginning balance of $71,200 in its Raw
Materials Inventory account. At the end of the period, the ending balance in this account was $75,000.
During the period, Tim purchased $150,700 of materials. What was the cost of raw materials used
during the period?

A. $146,900
B. $225,700
C. $75,700
D. $221,900

Question 30
Natural Beauty, a cosmetic manufacturer, is planning to produce 60,900 lipsticks and sell 63,000 lipsticks
during November. Each lipstick requires 4.4ounces of raw material at $0.28 per ounce and 0.25 direct
labor hours at $12 per hour. Manufacturing overhead is applied at 110% of direct labor costs. Natural
Beauty has 273,000 ounces of raw material in beginning inventory and wants 315,000 ounces in ending
inventory. What is the total amount of budgeted manufacturing overhead for November?

A. $200,970
B. $803,880
C. $207,900
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

D. $3,537,072

Question 31
Spartan Bicycles forecasts sales of 12,000 bikes for June and 14,000 bikes for July. Its inventory at the
end of May stands at 3,000 bikes. If Spartan plans to keep an inventory of 25% of July sales at the end of
June, how many bikes should it manufacture for the month of June?

A. 12,000
B. 11,500
C. 13,000
D. 12,500

Question 32
Fashion Glo, a manufacturer of children's clothing, is developing its cash budget. It has identified the
following budgeted items:

Which amount will it include on the cash budget?

A. $37,400
B. $48,400
C. $73,400
D. $49,400

Question 33
Under which of the following circumstances can a budget be considered a pressure or blame device
rather than a planning, communication, and coordinating tool?

A. When it includes technically incorrect or unrealistic targets.

B. When it is viewed as an internal control device.
C. When the budget is largely prepared by higher authorities.
D. When executive leadership fully endorses the budget.

Question 34
Holland Company is in the process of projecting its cash position at the end of the second quarter.
Shown below is pertinent information from Holland's records.
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

From the data above, determine Holland's projected cash balance at the end of the second quarter.

A. $35,000.
B. $59,000.
C. $105,000.
D. $95,000.

Question 35
Which of the following statements is correct concerning the cash budget?

A. Increasing the percentage of inventory purchased on credit relative to inventory purchased for
cash would increase expected cash receipts in a cash budget.
B. Increasing the percentage of inventory purchased on credit relative to inventory purchased for
cash would increase expected cash disbursements in a cash budget.
C. Increasing the percentage of inventory purchased on credit relative to inventory purchased for
cash would decrease expected cash receipts in a cash budget.
D. Increasing the percentage of inventory purchased on credit relative to inventory purchased for
cash would decrease expected cash disbursements in a cash budget.

Question 36
The direct materials budget is often broken down into:

A. a direct materials mix budget and a direct materials yield budget.

B. a direct materials usage budget and a direct materials purchase budget.
C. a direct materials mix budget and a direct materials purchase budget.
D. a direct materials yield budget and a direct materials usage budget.

Question 37
Richmond Enterprises is reviewing its policies and procedures in an effort to enhance goal congruence
throughout the organization. The processes that are most likely to encourage this behavior are:

A. cost-based transfer pricing, imposed budgeting, and activity-based costing.

B. participatory budgeting, reciprocal cost allocation, and management-by-objective performance
evaluation.
C. management-by-objective performance (MBO) evaluation and participatory budgeting.
D. reciprocal cost allocation, zero-base budgeting, and standard costing.

Question 38
Mounce Inc. produces and sells free-standing quilt frames. In budgeting for production needs, the
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

company requires that 5% of the next month's sales be on hand at the end of each month. Budgeted
sales of quilt frames over the next four months are:

What is budgeted production for October?

A. 30,000 units
B. 31,000 units
C. 29,000 units
D. 32,500 units

Question 39
B&R Tax Services is preparing its direct labor budget for the first quarter of the year. The total direct
labor budget for the first quarter is $55,500. The firm expects to prepare 300 small returns which take 1
hour each, 200 medium returns which take 1.75 hours each, and 100 complicated returns which
take2.75 each. What is B&R's direct labor cost per hour?

A. $92.50
B. $52.86
C. $60.00
D. $33.64

Question 40
Which of the following statements reflects specifically the function of planning process?

A. It provides insight into better ways to achieve goals that have already been established.
B. It promotes communication and coordination of efforts within an organization.
C. It compares the actual results for a period to the budgeted results for the period.
D. It allows the organization to communicate its goals to everyone in an organization.

Question 41
All of the following are criticisms of the traditional budgeting process except that it:

A. incorporates non-financial measures as well as financial measures into its output.

B. makes across-the-board cuts when early budget iterations show that planned expenses are too
high.
C. overemphasizes a fixed time horizon such as one year.
D. is not used until the end of the budget period to evaluate performance.

Question 42
For the month of December, Crystal Clear Bottling expects to sell 12,500 cases of Cranberry Sparkling
Water at $24.80 per case and 33,100 cases of Lemon Dream Cola at $32.00 per case. Sales personnel
receive six percent commission on each case of Cranberry Sparkling Water and eight percent
commission on each case of Lemon Dream Cola. In order to receive a commission on a product, the sales
personnel team must meet the individual product revenue quota. The sales quota for Cranberry
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

Sparkling Water is $500,000, and the sales quota for Lemon Dream Cola is $1,000,000. The sales
commission that should be budgeted for December is:

A. $103,336.
B. $84,736.
C. $0.
D. $18,600.

Question 43
As an accountant, you were asked to collect financial data for the past three years from the sales,
production, research, and marketing departments. Based on this information, at what point is the
company in its budgeting process?

A. In the middle
B. At the end
C. At the beginning
D. At the comparative stage.

Question 44
Rowan Catering is a service company that employs 12 full-time chefs and 150 part-time servers. The
company frequently caters 50 parties each week in a large metro area; however, with the downturn in
the economy, they have only been averaging 28 parties per week. How will this affect their direct labor
budget?

A. Their direct labor budget will increase because they will be paying employees who have no work
to do.
B. Their direct labor budget will not be affected.
C. Their direct labor budget will increase, which means they will have to increase their prices to
pay their employees adequately.
D. Their direct labor budget will decrease, which means they will likely need to lay off some
employees.

Question 45
Jordan Auto has developed the following production plan.

Each unit contains three pounds of raw material; the desired raw material ending inventory each month
is 120% of the next month's production, plus 500 pounds. (The beginning inventory meets this
requirement.) Jordan has developed the following direct labor standards for production of these units.

Jordan Auto's total budgeted direct labor dollars for February usage should be:
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

A. $156,000.
B. $108,000.
C. $48,000.
D. $150,000.

Question 46
Which of the following is not a step in an ideal budget process?

A. The budget draft is revised in an iterative process based on discussion between participants at
different management levels.
B. Budget participants outside of top management prepare an initial budget draft.
C. The initial budget draft is submitted to the next management level up for review and input.
D. Line managers approve the final budget.

Question 47
Michael was asked to collect the financial data from all the different departments so that top
management could determine if they met their goals. At what point is the company in its budgeting
process?

A. In the middle of the budgeting process.

B. At the end of the budgeting process.
C. At the beginning of the budgeting process.
D. At the end of the budget period.

Question 48
What is the relationship between the manufacturing overhead budget and the production budget?

A. The manufacturing overhead budget has no relation with the production budget.
B. The production budget depends on, and is a function of, the manufacturing overhead budget.
C. The manufacturing overhead budget depends on, and is a function of, the production budget.
D. The manufacturing overhead budget affects the sales budget, which then affects the production
budget.

Question 49
Which statement is correct concerning preparing a sales budget?

A. Sales forecasts should only be based on statistical analysis techniques such as regression
analysis and time series analysis.
B. Sales forecasts should only be based on qualitative analysis techniques such as sales managers’
knowledge about the market and customer needs.
C. Sales forecasts should be based on both statistical analysis and qualitative analysis techniques.
D. Last year's sales should be used as the sales forecast for the current year.

Question 50
All of the following statements concerning “ideal standards” are correct except:

A. Ideal standards assume no delays or stoppages for machine breakdowns.

B. Ideal standards assume employees work at peak efficiency at all times.
C. Ideal standards are also called theoretical standards.
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

D. Ideal standards are expected to be achieved most of the time.

Question 51
All of the following statements concerning authoritative standards are correct except:

A. Employees tend to resent authoritative standards more than participative standards.

B. Authoritative standards tend to be established less quickly than participative standards.
C. Authoritative standards tend to improve employee motivation less than participative standards.
D. Authoritative standards tend to be more closely matched to company goals than participative
standards.

Question 52
“Good benchmarks can lead a company towards continuous improvement.” Under which of the
following circumstances can benchmarking most likely lead to negative results?

A. Adhering to benchmarks demotivates employees, thereby affecting their productivity.

B. Using data from a new and high-growth industry to benchmark goals in a manufacturing
industry.
C. Benchmarking involves a lot of costs which make the budgeting process less cost effective.
D. Using benchmarks which allow for flexibility in results provide managers with room for adjusting
their output.

Question 53
Firecracker Wings has budgeted the following costs for a month:

If 24,000 wings are cooked and sold in this month, and each wing sells for $0.80, what is the budgeted
fixed cost per unit?

A. $0.10
B. $0.35
C. $0.80
D. $0.45

Question 54
Cupid Manufacturing is preparing its direct materials budget. The company has budgeted to purchase
88,480 pounds of direct materials. The desired ending inventory of direct materials is 67,200 pounds
and the total materials required is 96,600 pounds. What is the amount of total direct materials needed
for production?

A. 8,120 pounds
B. 21,280 pounds
C. 185,080 pounds
D. 29,400 pounds
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

Question 55
It's January 1 and an accountant is preparing her firm's cash budget, obtaining the following
information. Sales for the previous November and December were $50,000 and $52,000, respectively.
Sales projected for January and February are $55,000 and $57,000, respectively. Direct materials (DM)
purchases are approximately 40% of sales. Firm policy dictates that all DM are purchased the month
prior to their use in production. Historical payment patterns indicate that 30% of DM purchases are paid
in the same month as the purchase; 50% are paid the month following the purchase and 20% are paid
two months following the purchase. What are expected cash disbursements for direct materials in
January?

A. $22,000.
B. $17,840.
C. $22,800.
D. $6,840.

Question 56
Jordan Auto has developed the following production plan.

Each unit contains three pounds of raw material; the desired raw material ending inventory each month
is 120 percent of the next month's production, plus 500 pounds. (The beginning inventory meets this
requirement.) Jordan has developed the following direct labor standards for production of these units.

How much raw material should Jordan Auto purchase in March?

A. 43,700 pounds.
B. 32,900 pounds.
C. 37,800 pounds.
D. 27,000 pounds.

Question 57
Electra Manufacturing is preparing its annual direct labor budget. The company's total budgeted direct
labor cost is $739,200. Each unit requires 2 direct labor hours at $10 per direct labor hour. How many
units is the company budgeting to produce?

A. 147,840
B. 73,920
C. 369,600
D. 36,960
 Part 1: Budgeting Concepts Anual Profit Plan (Operating Budgets-Cash Budget)

Question 58
Which of the following is not a step in an ideal budget process?

A. Line managers define strategic direction for budget participants.

B. Budget participants outside of top management prepare an initial budget draft.
C. The initial budget draft is submitted to the next management level up for review and input.
D. The budget draft is revised in an iterative process based on discussion between participants at
different management levels.

Question 59
A company that uses the top-down approach rather than a participative process will feel the impact of
its budgeting process mostly in which form?

A. Greater commitment of operating managers to the final budget

B. Longer time cycle required to prepare the budget
C. Lack of commitment of operating managers to the final budget
D. Greater flow of information from the bottom to the top

Question 60
Which of the following statements concerning successful budgeting is not correct?

A. Top management needs to make sure all levels of an organization understand and support a
finalized budget for it to be successful.
B. Even though line managers typically have more input into budgets than top management has,
top management is ultimately responsible for budgets.
C. Budgets created by top management are likely to be more successful than budgets created by
line managers.
D. A budget endorsed by top management is more likely to be followed by line managers than a
budget not endorsed by top management.