QUESTION 16

1. Which of the following can be a problem with participative budgeting?

   		Budget-based incentives lead to incorrect information about projected costs and sales (budgetary slack) being communicated to higher level management.
   		All the other answers.
   		Production budgets are established based on unrealistically low sales forecasts, leading to production being short of materials and labor.
   		Conflicts of interest when lower level managers are evaluated by comparing actual results to the budget.

2 points

QUESTION 17

1. Which component of the master budget is NOT needed to create the budgeted income statement?

   		The cash budget
   		The sales budget
   		The direct materials budget
   		The selling and administrative budget

2 points

QUESTION 18

1. A revised master budget that represents expected costs given actual sales is called the:

   		Budgeted income statement
   		Master budget
   		Flexible budget
   		Standard budget

2 points

QUESTION 19

1. What is the best way to establish standard costs?

   		Strive for perfection, with the lowest imaginable costs
   		Use ideal standards, assuming no waste or down time
   		Adjust ideal standards for common problems in production (machine downtime due to maintenance, expected materials waste, etc).
   		Use historical data from when the product was first being released

2 points

QUESTION 20

1. Which of the following best describes variance analysis?

   		Comparing flexible budget costs to actual costs
   		Comparing master budget costs to actual costs
   		Comparing flexible budget costs to master budget costs
   		Comparing ideal costs to master budget costs