Multiple Choice Answers

1. ____________budgeting is when budgets are formulated with the active participation of all affected employees. Financial


2. The master budget quantifies targets for all of the following except
cost-driver activity


3. _____________are sometimes called rolling budgets. Continuous budgets

Pro forma statements

Capital budgets

Strategic plans


4. __________is generally prepared as the first step in preparing the operating budgets.

A purchases budget

A sales budget

An operating expense budget
A budgeted income statement


5. The operating-budget process results in the ____________.

budgeted cash balance           

sales budget   

budgeted balance sheet         

budgeted statement of income


6. A budget that is often changed at the end of a reportingperiod is called a __________ budget.




trial balance


7. To achieve maximum benefits at minimum cost, a managementcontrol system must foster ________.

8. ________cost is the drive for some selected goal thatcreates effort and action toward that goal.

9. Warranty costs are a form of ________cost. 

10. To calculate the contribution by segment, take contributioncontrollable by segment managers minus _______. 

11. To evaluate the financial performance of a segment, and notthe financial performance of the segment’s manager, use _________. 

12. _________is the process by which organizations concentratedecision making within a particular location or group.

13. Managers’ incentives for performance are defined as the____________.

14. Historical cost is widely used for asset valuation because__________.

15. The minimum desired rate of return on an investment issometimes referred to as ________.

16. Assume the net present value method is used to evaluateinvestment opportunities. A manager is faced with several investments, but onlyhas funding for one investment. Which investment should be chosen?

17. When using the net present value method, if the net presentvalue is positive, that the _________.

18. When comparing projects using the total project approach, amanager should choose the project with the ________.

19. The marginal tax rate for a company is the ______.

20. The time it will take to recoup in the form of cash inflowsthe initial dollars invested in an investment project is called the ________.

21. A disadvantage of the accounting rate of return model is________.

22. For costs that accountants cannot directly trace to productsor services, accountants use _________ or _________.

23. Assume the cost object is customers. Why should indirectcosts associated with customers by allocated to customers instead of producingdepartment?

24. ________costs relate to more than one product and cannot beseparately identified with an individual product.

25. Who is usually responsible for sales activity incomevariances?

research and development function       

product design function 

operating managers in factory

marketing managers