1. Which of the following statements is true about the static budget?

A) All of the above

B) It can be used to evaluate and compare actual results

C) It is based on standard costs

D) It is based on planned production

2. When discussing the roles of budgets, a planning role in the budgeting process includes:

A) Assessing performance

B) Reporting actual amounts at the end of the budgeting period

C) Measuring outcomes against planned amounts

D) Developing the master budget

3. Which of the following is not a role of the financial budgets in the master budget?

A) To estimate the financial consequences of production and sales plans

B) To estimate the financial consequences of capital investment plans

C) To help predict when there will be cash excesses or shortages

D) To provide the foundation data for financial reporting

4. In zero-based budgeting:

A) Managers must justify each item within the operating budget as if it were a new budget item

B) The prior year's budgeted amounts or actual results are used to build the new operating budget

C) The budget is prepared by the top managers

D) The budget is never updated

5. In incremental budgeting:

A) Managers must justify each item within the operating budget as if it were a new budget item

B) The budget is never updated

C) The prior year's budgeted amounts or actual results are used to build the new operating budget

D) The budget is prepared by the top managers

6. Which of the following statements is not true?

A) Budgeting sets targets for future performance.

B) Budgeting helps to coordinate organization activities.

C) Budgeting is done before strategy is set.

D) Budgeting is prepared in advance of the budget period.