Study4smart Quality review Materials

ch23
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Consulting the persons affected by a budget when it is prepared can provide an effective means of motivation and cooperation. True False A budget can be an effective means of communicating management's plans to the employees of a business. True False Budgets are normally more effective when all levels of management are involved in the budgeting process. True False One of the major benefits of formal budgeting is the positive effect it can have on employee attitudes if applied correctly. True False Budgeting is an informal plan for future business activities. True False A budget is a formal statement of future plans, usually expressed in monetary terms. True False Past performance is the best overall basis for evaluating current performance and assessing the need for corrective action. True False The process of evaluating performance can be improved by using budgets. True False Continuous budgeting is the practice of preparing a new budget for a selected number of future periods and replacing budgets for periods that have lapsed. True False

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10. Budget preparation is best determined in a top-down managerial approach. True False 11. The task of preparing a budget should be the sole task of the most important department in an organization. True False 12. The responsibility for coordinating the preparation of a master budget should be assigned to the Chief Executive Officer. True False 13. Larger, more complex organizations usually require a longer time to prepare their budgets than smaller organizations because of the considerable effort to coordinate the different units within the business. True False 14. A rolling budget is a specific budget application relevant only to a merchandising company. True False 15. The budgets within the master budget must be prepared in a definite sequence as dictated by GAAP. True False

16. The merchandise purchases budget depends on information provided by the sales budget. True False 17. The master budget is a small component of the comprehensive budget. True False 18. The merchandise purchases budget is the starting point for preparing the master budget. True False 19. The master budget consists of three major groups of budget components: the operating budgets, the capital expenditures budgets, and the financial budgets. True False 20. The financial budgets of a business include the cash budget, the budgeted income statement, and the budgeted balance sheet. True False 21. The budget process is a continuous activity of planning, revising, and evaluating business activities. True False 22. A master budget refers to a company's sales budget that includes all of its segments or departments. True False 23. Activity-based budgeting is a budget system based on expected activities and their activity levels, which helps management plan for the resources required. True False 24. Traditional budgeting is generally better than activity-based budgeting when attempting to reduce costs by eliminating nonvalue-added activities. True False 25. The sales budget is derived from the production budget. True False 26. A capital expenditures budget is prepared before the operating budgets. True False 27. The selling expenses budget is normally prepared before the sales budget because selling expenses affect the amount of sales. True False 28. A manufacturing budget should include a list of equipment to be scrapped and additional equipment to be purchased if the proposed production budget is carried out. True False 29. If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and cost of goods sold is expected to be $10,260, then budgeted purchases should be $9,160. True False 30. Part of the cash budget is based on information taken from the capital expenditures budget. True False 31. A cash budget is a plan that includes the expected cash receipts and cash expenditures during each of the periods that it covers. True False 32. The budgeted balance sheet is prepared from data contained in the previously prepared components of the master budget. True False

33. Financial budgets are normally completed after preparation of operating and capital expenditure budgets. True False 34. The financial budgets include the cash budget and the capital expenditures budget. True False 35. A company's history indicates that 20% of its sales are for cash and the rest are on credit. Collections on credit sales are 20% in the month of the sale, 50% in the next month, and 30% the following month. Projected sales for January, February, and March are $75,000, $92,000 and $60,000, respectively. The March expected cash receipts from all current and prior credit sales are $80,500. True False 36. Production budgets should always show both budgeted units of product and costs. True False 37. The manufacturing budget shows only the direct materials needed for production. True False