Accounting 203

1. The term planning involves a. the development of future objectives and the preparation of various budgets to achieve these objectives. b. the steps taken to ensure that objectives set down by management are attained. c. the steps taken to ensure that all parts of the organization function in a manner consistent with organizational policies. d. comparing budgeted and actual results and taking steps to remedy unacceptable variations.

2. Self-imposed budgets typically are a. not subject to review by higher levels of management since to do so would contradict the participative aspect of the budgeting processing. b. not subject to review by higher levels of management except in specific cases where the input of higher management is required. c. subject to review by higher levels of management in order to prevent such self-imposed budgets from becoming too loose and allowing too much freedom in activities. d. not critical to the success of a budgeting program.

3. Which of the following statements is not correct? a. The sales budget is the starting point in preparing the master budget. b. The sales budget is constructed by multiplying the expected sales in units by the sales price. c. The sales budget generally is accompanied by a computation of expected cash receipts for the forthcoming budget period. d. The cash budget must be prepared prior to the sales budget since managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.

4. The budgeted amount of raw materials to be purchased is determined by a. adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule. b. subtracting the beginning inventory of raw materials from the raw materials needed to meet the production schedule. c. adding the desired ending inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the beginning inventory of raw materials. d. adding the beginning inventory of raw materials to the raw materials needed to meet the production schedule and subtracting the desired ending inventory of raw materials.

Page 1 Version 1 5. Which of the following is not correct regarding the manufacturing overhead budget? a. Manufacturing overhead costs should be broken down by cost behavior and a predetermined overhead rate developed. b. The manufacturing overhead budget should provide a schedule of all costs of production other than direct materials and direct labor. c. A schedule showing budgeted cash disbursements for manufacturing overhead should be prepared for use in developing the cash budget. d. Total budgeted cash disbursements for overhead is equal to the total of budgeted variable and fixed overhead.