QUESTION 1

All of the following are advantages of budgeting except:

		The budgeting process can uncover potential bottlenecks before they occur.
		Budgets help individual departments of the firm to plan and control without interference of upper management.
		Budgets force managers to think about and plan for the future.
		Budgets communicate management's plans throughout the organization.

3 points

QUESTION 2

Which of the following statements is true with regard to self-imposed budgets?

		Self-imposed budgets prevent all managers from creating budgetary slack.
		A self-imposed budget is a budget that is prepared with the full cooperation and participation of managers at all levels.
		A self-imposed budget is a method of preparing budgets where the higher-level managers prepare the budgets which are then reviewed and approved by lower-level managers.
		Self-imposed budgets prevent lower-level managers from making suboptimal budgeting recommendations.

3 points

QUESTION 3

Which of the following statements is true?

		If the sales budget is inaccurate, the rest of the budget will be inaccurate.
		The master budget for all firms consists of three interdependent budgets that formally lay out the company's production.
		The sales budget influences the fixed cost portion of the selling and administrative expense budget.
		The first schedule of the master budget is the cash budget.

3 points

QUESTION 4

Which equation describes the production budget?

		Required unit sales + Total needs - Units of beginning finished goods inventory = Budgeted production in units
		Budgeted unit sales - Desired units of ending finished goods inventory + Units ofbeginning finished goods inventory = Required production in units
		Budgeted unit sales + Desired units of ending finished goods inventory - Units of beginning finished goods inventory = Required production in units
		Required unit sales - Desired units of ending finished goods inventory + Units of beginning finished goods inventory = Budgeted unit sales

3 points

QUESTION 5

All of the following terms are synonyms for relevant cost except:

		Avoidable cost
		Sunk cost
		Incremental cost
		Differential cost

3 points

QUESTION 6

What two categories of costs are never relevant in decisions?

		Variable and fixed costs.
		Sunk costs and future costs that do not differ between the alternatives.
		Opportunity costs and sunk costs.
		Unavoidable costs and differential costs.

3 points

QUESTION 7

All of the following statements are true except:

		Joint costs are relevant in decisions regarding what to do with a product from the split-off point forward.
		Unavoidable costs are irrelevant costs.
		A sunk cost is a cost that has already been incurred and cannot be avoided regardless of what a manager decides to do.
		Opportunity costs need to be considered when making decisions.

3 points

QUESTION 8

Which of the following is not a sunk cost?

		The cost of an asset purchased five years ago.
		The cost of a new asset that is being purchased to replace an asset purchased ten years ago.
		This year's depreciation on an asset purchased three years ago.
		The current book value on an asset purchased eight years ago.