1. All operating budgets should contain revenue and expense components.

a. True

b. False

2. Evaluating the value chain and capacity issues are not part of the budgeting process.

a. True

b. False

3. A budget can contain only financial information.

a. True

b. False

4. Budgets are plans of action based on forecasted transactions, activities, and events.

a. True

b. False

5. Budgets assign resources and the responsibility to use them wisely to managers who are held accountable for their results.

a. True

b. False

6. Operating budgets are plans used in daily operations.

a. True

b. False

7. A master budget consists of a set of operating budgets and a set of financial budgets for a specific accounting period.

a. True

b. False

8. Operating budgets are limited to service organizations.

a. True

b. False

9. Managers do not need to know why a budget is being prepared, as these are prepared by higher authorities.

a. True

b. False

10. The budgeting function begins with the preparation of a production budget.

a. True

b. False

11. The direct labor budget is needed to prepare the production budget.

a. True

b. False

12. The selling and administrative expense budget is typically separated into variable and fixed cost components.

a. True

b. False