1. Budgets represent management’s plans in financial 19.

The production budget must be completed before

terms. True
2. Budgets promote efficiency and serve as a deterrent
to waste. True
3. A budget can be a means of communicating a
company's objectives to external parties. False
4. A budget facilitates coordination of activities within
the business but is a poor tool for evaluating
performance. False
5. A budget is more beneficial if accepted by lower-level
management. True
6. The budget itself and the administration of the
budget are the responsibility of management. True
7. The most common budget period is one year. True
8. The flow of input data for budgeting should be from
the lowest levels of responsibility to the highest level.
True
9. Budgets, by their very nature, create a negative effect
on human behavior within companies because they
imply that management is trying to control. False
10. A budget committee coordinates the budget
activities of a company. True
11. The shorter the budget period, the more reliable the
estimates of future outcomes. True
the materials purchases budget because the number of
units to be produced must be known to determine how
much material to buy. True
20. The number of direct labor hours needed for
production is obtained from the direct labor budget.
True
21. Companies can use either a predetermined
overhead rate or a manufacturing overhead budget.
False
22. The manufacturing overhead budget generally has
separate sections for variable and fixed costs. True
23. A sales budget should be prepared before the
production budget. True
24. The direct materials budget contains only quantity
data so the purchasing department knows how much
materials should be purchased. False
25. The budgeted income statement indicates the
expected amount of cash expected to be acquired from
operations. False
26. Companies that do not prepare cash budgets have
significant cash deficiencies. False
27. In preparing the budgeted balance sheet,
management should not be concerned if it does not
balance since it does not reflect actual results. False

12. Upper level managers are responsible for preparing 28. The first budget prepared should be the sales
the entire budget. False budget. True

13. The last step in the budgeting process is developing
a sales forecast. False
14. Budgeting and long-range planning differ in the
emphasis and the time period involved. True
29. A merchandiser has a merchandise purchases
budget, and a manufacturer has a materials purchases
budget. True
30. A service company has no purchases budget. True

15. Long-range plans are used primarily as an evaluation

of specific results to be achieved. False

16. Long-range plans reflect management's long-term

plans encompassing five years or more. True

17. The master budget consists of a plan of action for a

specified time period. True

18. Operating budgets must be completed before the

financial budgets can be prepared. True