Multiple-Choice Questions
1. A budget
a. Is a long-term plan.
b. Covers at least two years.
c. Is only a control tool.
d. Is a short-term financial plan.
e. Is necessary only for large firms.
2. Which of the following is part of the control process?
a. Monitoring of actual activity
b. Comparison of actual with planned activity
c. Investigating
d. Taking corrective action
e. All of these
3. Which of the following is not an advantage of budgeting?
a. It forces managers to plan.
b. It provides information for decision making.
c. It guarantees an improvement in organizational efficiency.
d. It provides a standard for performance evaluation.
e. It improves communication and coordination.
4. The budget committee
a. Reviews the budget.
b. Resolves differences that arise as the budget is prepared.
c. Approves the final budget.
d. Is directed ( typically) by the controller.
e. Does all of these.
5. A moving, 12-month budget that is updated monthly is
a. A continuous budget.
b. Waste of time and effort.
c. A master budget.
d. Not used by industrial firms.
e. Always used by firms that prepare a master budget.
6. Which of the following is not part of the operating budget?
a. The direct labor budget
b. The cost of goods sold budget
c. The production budget
d. The capital budget
e. The selling and administrative expenses budget
7. Before a direct materials purchases budget can be prepared, you should first
a. Prepare a sales budget.
b. Prepare a production budget.
c. Decide on the desired ending inventory of materials.
d. Obtain the expected price of each type of material.
e. Do all of these.
8. The first step in preparing the sales budget is to
a. Prepare a sales forecast.
b. Review the production budget carefully.
c. Assess the desired ending inventory of finished goods.
d. Talk with past customers.
e. Increase sales beyond the forecast level.
9. Which of the following is needed to prepare the production budget?
a. Direct materials needed for production
b. Direct labor needed for production
c. Expected unit sales
d. Units of materials in ending inventory
e. None of these
10. A company requires 100 pounds of plastic to meet the production needs of a small toy. It currently has 30 pounds of plastic inventory. The desired ending inventory of plastic is 10 pounds. How many pounds of plastic should be budgeted for purchasing during the coming period?
a. 80 pounds
b. 110 pounds
c. 120 pounds
d. 130 pounds
e. None of these