QUESTION 1

Budget variances occur when:

	a.	actual revenues do not match budgeted revenues exactly
	b.	both actual expenses do not match budgeted expenses exactly and/or actual revenues do not match budgeted revenues exactly
	c.	None of the answers are correct
	d.	actual expenses do not natch budgeted expenses exactly

5 points

QUESTION 2

Which of the following is true regarding line-item budgets?

	a.	All of the answers are correct
	b.	Line-item budgets refer to to budgets that authorize the manager to spend only up to the specified amount on each line item
	c.	Line-item budgets reduce agency problems
	d.	Line-item budgets reduce possible managerial opportunism and are prevalent in governments

5 points

QUESTION 3

Below are some budgeting techniques which are used rarely (or more often) by government agencies and corporations. Which answer is true?

	a.	Zero-based budgeting is rarely used by corporations and often used by government agencies
	b.	Budget lapsing is often used by corporations and often used by government agencies
	c.	Encumbrance accounting is often used by corporations and rarely used by government agencies
	d.	Flexible budgeting is rarely used by corporations and often used by government agencies

5 points

QUESTION 4

Below are various statements about different budgeting techniques. Which is false?

	a.	Master (static) budgets are prepared for a single level activity
	b.	Budget lapsing prevents managers from hoarding funds
	c.	Budget lapsing encourages managers to spend money regardless of cost or value
	d.	Budget ratcheting tightens targets when performance fails to meet the target by a predetermined percentage

5 points

QUESTION 5

Which of the following is true regarding how budgets are developed?

	a.	All of the answers are correct
	b.	Effective planning of budgets require input from numerous individuals in the firm
	c.	Budgets require basic estimating factors
	d.	Budgets are developed using key planning assumptions

5 points

QUESTION 6

Because people prepare budgets, budget figures are often biased. Which of the following is true?

	a.	None of the answers are correct
	b.	Efficient organizations begin their budget process with last year's budget, and adjust the figures by a certain percentage
	c.	Sales quantity forecasts tend to be exaggerated (over-estimated) to make the sales team look good
	d.	When senior management sets budget numbers, a more realistic budget can be developed
	e.	Production cost estimates tend to be overstated to create wiggle room (budgetary slack)

5 points

QUESTION 7

Are budgets part of the performance measurement system or the performance reward system?

	a.	Part of both the performance measurement system and the performance reward system
	b.	Part of neither the performance measurement system nor the performance reward system
	c.	Part of the performance measurement system only
	d.	Part of the performance reward system only

5 points

QUESTION 8

Which of the following is NOT true regarding static and flexible budgeting?

	a.	Performance budgets are adjusted for changes in volume
	b.	Static budgets vary with volume
	c.	Flexible budgets are better than static budgets for determining the actual performance of a person or venture after controlling for volume effects.
	d.	Static budgets force managers to be responsible for volume fluctuations

5 points

QUESTION 9

Which of the following is NOT true regarding budget lapsing?

	a.	Budgets that lapse provide tighter controls on managers than budgets that do not lapse
	b.	Budget lapsing allows unused funds to be carried over to the next year
	c.	Firms often incur substantial warehousing costs to hold extra end-of-year purchases
	d.	Budget lapsing creates incentives for managers to spend all of their budget

5 points

QUESTION 10

What is the correct answer regarding short-run and long-run budgets?

	a.	A long-run budget is generally one year in length and often tied to a particular department or division
	b.	None of the answers are correct
	c.	A long-run budget projects from two (2) to 10 years into the future
	d.	A short-run budget is generally less than a year in length and often tied to a particular project