Question 1
The required components of the master budget include all except the ________.
- operating budget
- budgeted income statement
- budgeted balance sheet
- Selected: balanced scorecardThis answer is correct.
Correct! The balanced scorecard is not a required component of the master budget; only the major financial statements and the operating budget are required.
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Question 2
True or False: In a bottom-up or participative budgeting process, it is the responsibility of executives to minimize slack by carefully reviewing the proposed plan completed by staff managers for approval.
- True
- FalseThis answer is incorrect.
Reconsider your response. Note to review Module 5, Page IV.
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Question 3
Bottom-up budgeting is an approach that ________
- is top-down in nature
- requires top executives to establish the budget
- eliminates budgetary slack
- Selected: is more likely to motivate people to work towards the organization’s goals than a budget that is imposedThis answer is correct.
Correct! Bottom-up budgeting motivates people to work towards the organization’s goals.
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Question 4
Twisty Taffy’s budgeted production in units for the coming year would be calculated by ________.
- adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted ending finished goods inventory
- Selected: adding budgeted unit sales to budgeted beginning work-in-process inventory, and subtracting budgeted ending work in process inventoryThis answer is incorrect.
- adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory
- adding budgeted unit sales to budgeted ending work-in-process inventory, and subtracting budgeted beginning work-in-process inventory
Reconsider your response. Read Chapter 6 in your text again. What is added to and subtracted from sales in order to obtain required production?
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Question 5
Swiss Chocolate Company manufactures heart boxes filled with chocolate for Valentine’s Day. The cost formula for its overhead cost is $2,250 per month plus $16 per box. For the month of February, the company planned for activity of 502 boxes. The overhead cost in the budget for February would be closest to ________.
- $10,580
- Selected: $10,282This answer is correct.
- $10,686
- $10,202
Correct! The calculation is: $16 X 502 = $8,032; $2,250 + $8,032 = $10,282
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Question 6
Sweet Charity Company is working on its cash budget for February. The budgeted beginning cash balance is $26,000. Budgeted cash receipts total $104,000 and budgeted cash disbursements total $100,000. The desired ending cash balance is $40,000. To attain its desired ending cash balance for February, the company needs to borrow ________.
- $0
- $10,000
- Selected: $40,000This answer is incorrect.
- $70,000
Reconsider your response. Review Chapter 6 of your text in detail.
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Question 7
All of the following are benefits of a budget except ________.
- communication of the company’s short-term goals
- comparing actual to expected performance
- Selected: assessing legal compliance with regulationsThis answer is correct.
- determining eligibility for additional compensation
Correct! The company’s budget provides significant direction in establishing short-term goals, comparing actual to expected performance, and determining eligibility for additional compensation, but does not assess legal compliance with regulations.
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Question 8
True or False: In a company that is decentralized, top-down budgeting is typically used, since executives are very familiar with expected performance.
- True
- Selected:FalseThis answer is correct.
Correct! In a decentralized organization, bottom-up budgeting is typically used, since the managers working in the various divisions are more likely to be familiar with expected performance.
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Question 9
The control activity with respect to budgeting is completed when ________.
- budget amounts from the prior year are compared to the budget amounts for the current year
- actual amounts from the prior year are compared to the actual amounts for the current year
- Selected: budgeted amounts are compared to actual resultsThis answer is correct.
- none of the above
Correct! Control refers to evaluation, which requires actual amounts to be compared to budgeted amounts.
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Question 10
Sweet Charity Company manufactures candy canes. Budgeted sales for December are 10,000 units. Beginning finished goods inventory in December is budgeted to be 1,400 units, and ending finished goods inventory is budgeted to be 1,300 units. How many units must be produced in December?
- 9,900
- 10,000
- Selected: 10,100This answer is incorrect.
- 12,700
Reconsider your response. Be sure to calculate based on the calculation demonstrated in Module 5, Page II.
Week 5:
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Question 1
The required components of the master budget include all except the ________.
- operating budget
- budgeted income statement
- budgeted balance sheet
- Selected: balanced scorecardThis answer is correct.
Correct! The balanced scorecard is not a required component of the master budget; only the major financial statements and the operating budget are required.
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Question 2
True or False: In a bottom-up or participative budgeting process, it is the responsibility of executives to minimize slack by carefully reviewing the proposed plan completed by staff managers for approval.
- True
- FalseThis answer is incorrect.
Reconsider your response. Note to review Module 5, Page IV.
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Question 3
Bottom-up budgeting is an approach that ________
- is top-down in nature
- requires top executives to establish the budget
- eliminates budgetary slack
- Selected: is more likely to motivate people to work towards the organization’s goals than a budget that is imposedThis answer is correct.
Correct! Bottom-up budgeting motivates people to work towards the organization’s goals.
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Question 4
Twisty Taffy’s budgeted production in units for the coming year would be calculated by ________.
- adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted ending finished goods inventory
- Selected: adding budgeted unit sales to budgeted beginning work-in-process inventory, and subtracting budgeted ending work in process inventoryThis answer is incorrect.
- adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventory
- adding budgeted unit sales to budgeted ending work-in-process inventory, and subtracting budgeted beginning work-in-process inventory
Reconsider your response. Read Chapter 6 in your text again. What is added to and subtracted from sales in order to obtain required production?
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Question 5
Swiss Chocolate Company manufactures heart boxes filled with chocolate for Valentine’s Day. The cost formula for its overhead cost is $2,250 per month plus $16 per box. For the month of February, the company planned for activity of 502 boxes. The overhead cost in the budget for February would be closest to ________.
- $10,580
- Selected: $10,282This answer is correct.
- $10,686
- $10,202
Correct! The calculation is: $16 X 502 = $8,032; $2,250 + $8,032 = $10,282
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Question 6
Sweet Charity Company is working on its cash budget for February. The budgeted beginning cash balance is $26,000. Budgeted cash receipts total $104,000 and budgeted cash disbursements total $100,000. The desired ending cash balance is $40,000. To attain its desired ending cash balance for February, the company needs to borrow ________.
- $0
- $10,000
- Selected: $40,000This answer is incorrect.
- $70,000
Reconsider your response. Review Chapter 6 of your text in detail.
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Question 7
All of the following are benefits of a budget except ________.
- communication of the company’s short-term goals
- comparing actual to expected performance
- Selected: assessing legal compliance with regulationsThis answer is correct.
- determining eligibility for additional compensation
Correct! The company’s budget provides significant direction in establishing short-term goals, comparing actual to expected performance, and determining eligibility for additional compensation, but does not assess legal compliance with regulations.
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Question 8
True or False: In a company that is decentralized, top-down budgeting is typically used, since executives are very familiar with expected performance.
- True
- Selected:FalseThis answer is correct.
Correct! In a decentralized organization, bottom-up budgeting is typically used, since the managers working in the various divisions are more likely to be familiar with expected performance.
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Question 9
The control activity with respect to budgeting is completed when ________.
- budget amounts from the prior year are compared to the budget amounts for the current year
- actual amounts from the prior year are compared to the actual amounts for the current year
- Selected: budgeted amounts are compared to actual resultsThis answer is correct.
- none of the above
Correct! Control refers to evaluation, which requires actual amounts to be compared to budgeted amounts.
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Question 10
Sweet Charity Company manufactures candy canes. Budgeted sales for December are 10,000 units. Beginning finished goods inventory in December is budgeted to be 1,400 units, and ending finished goods inventory is budgeted to be 1,300 units. How many units must be produced in December?
- 9,900
- 10,000
- Selected: 10,100This answer is incorrect.
- 12,700
Reconsider your response. Be sure to calculate based on the calculation demonstrated in Module 5, Page II.
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Question 1
Sweet Charity Company produces boxes of candy products by the gross (candy canes and lollipops). During November, sales in units were projected to be 17,000 and production was projected to be 16,000 units. Direct labor rate is $6.50 per hour, and each unit takes 0.75 hours of direct labor to make. What is the total cost of direct labor for November?
- Selected: $73,125This answer is incorrect.
- $82,875
- $63,375
- $78,000
Reconsider your response. Review Module 5, Page II. Also, review Chapter 6 of your text.
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Question 2
Bottom-up budgeting is an approach that ________
- is top-down in nature
- requires top executives to establish the budget
- eliminates budgetary slack
- Selected: is more likely to motivate people to work towards the organization’s goals than a budget that is imposedThis answer is correct.
Correct! Bottom-up budgeting motivates people to work towards the organization’s goals.
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Question 3
True or False: Using the past financial history of a company is a feasible approach for evaluation of performance for the current period.
- True
- Selected:FalseThis answer is correct.
Correct! Since many changes may be expected in the performance of a company from period to period, it is best to incorporate any economic or operational changes in a budget, which is then used to benchmark current performance.
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Question 4
True or False: Operating managers will more readily participate in the budget process if they feel executives are committed to the bottom-up process.
- Selected:TrueThis answer is correct.
- False
Correct! When operating managers sense that executives are more committed to the bottom-up process, they will participate.
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Question 5
Sweet Charity Company is working on its cash budget for February. The budgeted beginning cash balance is $26,000. Budgeted cash receipts total $104,000 and budgeted cash disbursements total $100,000. The desired ending cash balance is $40,000. To attain its desired ending cash balance for February, the company needs to borrow ________.
- $0
- Selected: $10,000This answer is correct.
- $40,000
- $70,000
Correct! Excess cash available over disbursements = beginning cash balance + budgeted cash receipts – budgeted cash disbursements = $26,000 + $104,000 – $100,000 = $30,000
Borrowing = desired ending cash balance – excess cash available over disbursements = $40,000 – $30,000 = $10,000
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Question 6
True or False: In a bottom-up or participative budgeting process, it is the responsibility of executives to minimize slack by carefully reviewing the proposed plan completed by staff managers for approval.
- Selected:TrueThis answer is correct.
- False
Correct! In a participative or bottom-up budgeting process, staff managers propose budgets to executives; executives in turn should evaluate feasibility of the proposals initiated by managers.
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Question 7
Twisty Taffy Company manufactures saltwater taffy and has predicted the following sales for four months of the current year:
| April | May | June | July | |
| Sales in units | 1,700 | 1,900 | 2,100 | 1,600 |
Targeted ending inventory for each month should be 20% of the next month’s sales, and the prior March 31 inventory was consistent with that target. How many units should be purchased in the calendar second quarter of the year?
- 5,100
- 5,680
- Selected: 6,300This answer is incorrect.
- 6,000
Reconsider your response. Note to review Module 5, Page II. Review the calculations and recompute your answer.
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Question 8
Budgets that are updated periodically during the fiscal period to reflect anticipated, up-to-date changes in performance are called ________.
- Selected: rolling budgetsThis answer is correct.
- participatory budgets
- periodic budgets
- fiscal budgets
Correct! Rolling budgets essentially “roll forward” the performance of prior periods and incorporate anticipated changes expected since the original development of the fiscal budget for the period.
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Question 9
Sweet Charity Company produces two different products (candy canes and lollipops). The controller gathers the information below to develop the budget for next year:
| Sales in units | 800 packages | |
| Selling price per unit | $6 | |
| Inventory at beginning of the quarter (FG) | 80 packages | |
| Desired ending inventory (FG) | 130 packages | |
| Direct materials per unit | 4 ounces sugar | |
| Sugar inventory at beginning of quarter | 136 ounces | |
| Desired ending inventory of sugar | 84 ounces | |
| Sugar cost | $.10 per ounce | |
Compute the required budget quantity of sugar purchases for next year.
- 850 ounces
- 3,348 ounces
- Selected: 3,452 ouncesThis answer is incorrect.
- 798 ounces
Reconsider your response. Review Module 5, Page II. Also, review Chapter 6 of your text.
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Question 10
Sweet Charity Company manufactures candy canes. Budgeted sales for December are 10,000 units. Beginning finished goods inventory in December is budgeted to be 1,400 units, and ending finished goods inventory is budgeted to be 1,300 units. How many units must be produced in December?
- Selected: 9,900This answer is correct.
- 10,000
- 10,100
- 12,700
Correct! The calculation is 10,000 + 1,300 – 1,400 = 9,900.
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Question 1
Sweet Charity Company produces two different products (candy canes and lollipops). The controller gathers the information below to develop the budget for next year:
| Sales in units | 800 packages | |
| Selling price per unit | $6 | |
| Inventory at beginning of the quarter (FG) | 80 packages | |
| Desired ending inventory (FG) | 130 packages | |
| Direct materials per unit | 4 ounces sugar | |
| Sugar inventory at beginning of quarter | 136 ounces | |
| Desired ending inventory of sugar | 84 ounces | |
| Sugar cost | $.10 per ounce | |
Compute the required budget quantity of sugar purchases for next year.
- 850 ounces
- Selected: 3,348 ouncesThis answer is correct.
- 3,452 ounces
- 798 ounces
Correct! Finished goods required = 800 (sales) + 130 (ending inventory) – 80 (beginning inventory) = 850 units
Next quarter purchases of sugar inventory = (850 x 4) + 84 -136
3,400 + 84 – 136 = 3,348 ounces
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Question 2
True or False: Operating managers will more readily participate in the budget process if they feel executives are committed to the bottom-up process.
- Selected:TrueThis answer is correct.
- False
Correct! When operating managers sense that executives are more committed to the bottom-up process, they will participate.
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Question 3
Twisty Taffy’s budgeted production in units for the coming year would be calculated by ________.
- adding budgeted unit sales to budgeted beginning finished goods inventory, and subtracting budgeted ending finished goods inventory
- adding budgeted unit sales to budgeted beginning work-in-process inventory, and subtracting budgeted ending work in process inventory
- Selected: adding budgeted unit sales to budgeted ending finished goods inventory, and subtracting budgeted beginning finished goods inventoryThis answer is correct.
- adding budgeted unit sales to budgeted ending work-in-process inventory, and subtracting budgeted beginning work-in-process inventory
Correct! Adding required sales to ending inventory and subtracting beginning yields the required production level in units.
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Question 4
The control activity with respect to budgeting is completed when ________.
- budget amounts from the prior year are compared to the budget amounts for the current year
- actual amounts from the prior year are compared to the actual amounts for the current year
- Selected: budgeted amounts are compared to actual resultsThis answer is correct.
- none of the above
Correct! Control refers to evaluation, which requires actual amounts to be compared to budgeted amounts.
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Question 5
True or False: In a bottom-up or participative budgeting process, it is the responsibility of executives to minimize slack by carefully reviewing the proposed plan completed by staff managers for approval.
- Selected:TrueThis answer is correct.
- False
Correct! In a participative or bottom-up budgeting process, staff managers propose budgets to executives; executives in turn should evaluate feasibility of the proposals initiated by managers.
1/1
Question 6
True or False: Using the past financial history of a company is a feasible approach for evaluation of performance for the current period.
- True
- Selected:FalseThis answer is correct.
Correct! Since many changes may be expected in the performance of a company from period to period, it is best to incorporate any economic or operational changes in a budget, which is then used to benchmark current performance.
1/1
Question 7
True or False: In a company that is decentralized, top-down budgeting is typically used, since executives are very familiar with expected performance.
- True
- Selected:FalseThis answer is correct.
Correct! In a decentralized organization, bottom-up budgeting is typically used, since the managers working in the various divisions are more likely to be familiar with expected performance.
1/1
Question 8
Swiss Chocolate Company manufactures heart boxes filled with chocolate for Valentine’s Day. The cost formula for its overhead cost is $2,250 per month plus $16 per box. For the month of February, the company planned for activity of 502 boxes. The overhead cost in the budget for February would be closest to ________.
- $10,580
- Selected: $10,282This answer is correct.
- $10,686
- $10,202
Correct! The calculation is: $16 X 502 = $8,032; $2,250 + $8,032 = $10,282
1/1
Question 9
Budgets that are updated periodically during the fiscal period to reflect anticipated, up-to-date changes in performance are called ________.
- Selected: rolling budgetsThis answer is correct.
- participatory budgets
- periodic budgets
- fiscal budgets
Correct! Rolling budgets essentially “roll forward” the performance of prior periods and incorporate anticipated changes expected since the original development of the fiscal budget for the period.
1/1
Question 10
Twisty Taffy Company manufactures saltwater taffy and has predicted the following sales for four months of the current year:
| April | May | June | July | |
| Sales in units | 1,700 | 1,900 | 2,100 | 1,600 |
Targeted ending inventory for each month should be 20% of the next month’s sales, and the prior March 31 inventory was consistent with that target. How many units should be purchased in the calendar second quarter of the year?
- 5,100
- Selected: 5,680This answer is correct.
- 6,300
- 6,000
Correct! Note the calculation: purchases = (1,700 + 1,900 + 2100) + (1,600 X .20) – (1,700 X .20) = 5,680