Multiple Choice Answers

Question 1
A cost that is incurred because of a long-range policy decision is known as a:
Answer
discretionary cost.
committed cost.
continuous cost.
standard cost.
Question 2
Which of the following is a plan for acquiring the resources needed to complete the manufacturing activities that will satisfy the organization’s sales forecast?
Answer
Sales budget
Raw materials budget
Production budget
Direct labor budget
Question 3
Standard costs are comprised of two elements:
Answer
the quantity of input and the cost per unit of input.
the quality of input and the cost per unit of input.
the quantity of input and the cost per unit of output.
the quality of input and the cost per unit of output.

Question 4
The production budget uses all of the following except:
Answer
the sales forecast.
the inventory policy.
the cash receipts budget.
the beginning inventory quantity.
Question 5
Which of the following lists the components of the master budget in correct chronological order?
Answer
Cash budget, budgeted income statement, budgeted balance sheet.
Budgeted balance sheet, cash budget, budgeted income statement.
Budgeted income statement, cash budget, budgeted balance sheet.
It doesn’t matter in which order they are prepared.
Question 6
Operating expenses are best budgeted on the basis of knowledge about:
Answer
cost behavior patterns.
relevant range.
prior period actual expenses.
current period budget amounts.

Question 7
The kind of standard that is most useful for planning and control is:
Answer
an attainable standard.
an ideal, or engineered, standard.
a negotiated standard.
a past experience standard.
Question 8
Which of the following items would be included in the operating expense budget?
Answer
Sales commissions.
Raw material purchases.
Cash receipts.
Cost of goods sold.
Question 9
A key to estimating an accurate amount of cash to be collected from sales is:
Answer
the accuracy of the sales forecast.
the accuracy of the estimated collection patterns for sales.
both A and B are keys.
neither A nor B are keys.

Question 10
Developing a standard cost for a product or service will usually involve:
Answer
efforts of cost accounting personnel only.
focusing only on variable costs.
the same kind of communication involved in the overall budgeting process.
concentrating on historical costs and performance levels.
Question 11
A materials purchases budget must be completed immediately after the preparation of the:
Answer
direct labor budget.
operating expense budget.
cash budget.
production budget.
Question 12
A standard cost or production standard that is achievable under actual operating conditions is called a(n):
Answer
attainable standard.
ideal standard.
past experience standard.
average standard.

Question 13
The budgeting process that most likely creates an attitude supportive of achieving organization goals is:
Answer
top-down approach.
zero based approach.
proportionate increase approach.
participative approach.
Question 14
______________ standards allow inefficiencies from prior years to be incorporated into the budget, thus providing little incentive for improvement.
Answer
Ideal
Engineered
Attainable
Past experience
Question 15
The operating expense budget is based on the:
Answer
sales budget.
production budget.
manufacturing overhead budget.
cash budget.

Question 16
An important reason for imposing a minimum cash balance in the cash budget is:
Answer
it provides a cushion that can absorb forecast errors.
it provides extra funds for managers to spend.
it makes the balance sheet look better.
all of the above.
Question 17
Standards are likely to be most useful when expressed in:
Answer
dollars per unit of input to the manufacturing process.
quantities per unit of output from the process being evaluated.
total costs for the accounting period for the department being evaluated.
terms easily related to by the individual whose performance is being evaluated.
Question 18
A budgeting process that involves justifying resource requirements based on an analysis and prioritization of organizational objectives is called:
Answer
continuous budgeting.
zero-based budgeting.
discretionary budgeting.
single-period budgeting.

Question 19
A budget that is prepared for several periods in the future, then revised several times prior to the budget period is called a:
Answer
rolling budget.
zero-based budget.
discretionary budget.
single-period budget.
Question 20
The raw materials budgeted to be purchased for the period is equal to:
Answer
ending inventory + raw material used – beginning inventory.
ending inventory + ending inventory – raw material used.
beginning inventory – ending inventory + raw material used.
beginning inventory + raw material used – ending inventory.