Budgetary slack exists when a manager deliberately underestimates revenues or ov

Question

Budgetary slack exists when a manager deliberately underestimates revenues or overestimates costs in an effort to make the future period appear less attractive in the budget than they think it will be in reality. A) True B) False. 12. To prepare the ending finished goods inventory budget, the unit cost of producing finished goods must be calculated by using information from the sales and cash budgets. A) True. B) False. 3.The selling and administrative expenses budget outlines planned expenditures for both manufacturing and nonmanufacturing activities. A) True. B) False. 14. Typically, the master budget is for a one-year period, corresponding to the fiscal year of the company. A) True. B) False. 15. Budgets should reflect operating realities such as seasonal variations and general economic trends. A) True. B) False. 16. In an overhead budget: A) Only the variable overhead rate is included. B) Both budgeted variable and fixed overhead costs are included. C) A separate budget is prepared for fixed overhead. D) Several activity drivers are selected E) Separate budgets are prepared for fixed overhead and for variable overhead. Which of the following budgets is NOT considered when preparing a cost of goods sold budget? A) Direct materials budget. B) Direct labor budget

Explanation / Answer

11. A.True.

Reason : Deliberate underestimation and overestimation of revenue and cost respectively drives the slackness in Budget.

12. B.False.

Reason : The information of sales and production budget help in preparation of ending finished goods inventory budget and unit cost of producing finished good must be calculated by using the same information.

13. B.False.

Reason : Selling and Administrative expenses bugdet is the planned operating expenses other than manufacturing cost.

14. B.False.

Reason : Master budget is prepared for every year leads to best way operation of business.

15. A. True

Reason : Budget is the financial plan of all future activities for a defined period of time whether it is seasonal variations or general economic trends.

16. B. Both budgeted variable and fixed overhead costs are included.

Reason : Variable and Fixed overheads are the part of overheads budget.

17. D. Selling expenses budget.

Reason : It is not considered in preparation of cost of goods sold budget.

18. B. $5,800.

Budgeted Ending Cash Balance = Budgeted Beginning Cash Balance + Cash Receipts - Cash Payments - Loan Payments - Minimum Cash Balance

= 2,800 + 56,000 - 41,000 - 10,000 - 2000

= $ 5,800.

19. C. It aligns management goals with personal goals.

20. B. Noncontrollable Costs.

Reason : These costs are unavoidable in nature which can hamper the potentiality of participating budgeting.

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