Managerial Accounting Chapters 7-9

Budgeting is the process of establishing company-wide objectives that serve as a deter-rent to waste and inefficiency.

The effectiveness of the budget program is directly related to its acceptance by all levelsof management.

Budgeting always has the effect on human behavior of inspiring managers to higherlevels of performance.

One disadvantage of budgeting is that it does not facilitate the coordination of activitieswithin a business.

The sales budget is the first budget prepared and each of the other budgets depends on it.

The quantities of direct materials in the direct materials budget are derived from theformula: Desired Ending Direct Materials Units + Direct Materials Units Required forProduction – Beginning Direct Materials Units = Required Direct Materials Units to bePurchased.

The manufacturing overhead budget shows only the expected indirect labor costs forthe year.

The budgeted income statement indicates the expected profitability of operations for thenext year and provides the basis for evaluating company performance.

Long-range planning differs from budgeting in the time period involved, emphasis, andthe amount of detail presented.

Budgeting is not used in not-for-profit organizations because it is not necessary forthese organizations to engage in profit planning.

A formal written statement of management’s plans for a specified future time period,expressed in financial terms is a(n)

Which of the following is not a benefit of budgeting?

All of the following are financial budgets except the

The master budget includes all of the following except

If required production units are 75,000, budgeted sales units are 65,000, required directmaterials purchases units are 3,000, and beginning finished goods units are 5,000, thendesired ending finished goods units would be

In incremental analysis fixed costs may not change under alternative courses of action,while variable costs may change.

The relevant data to consider in accepting an order at a special price are the additionalmanufacturing costs incurred and expected revenues.

The basic decision rule to sell or process further is: process further as long as theincremental revenue from such processing exceeds the incremental processing costs.

Book value is a sunk cost and is therefore relevant in incremental analysis of retain orreplace equipment.

Fixed manufacturing costs will never be relevant in a make or buy decision.

Opportunity costs are costs that have already been incurred and will not be avoided byany future decision.

In deciding on the future status of an unprofitable segment, management should considerthe effect of elimination on the remaining product lines.

Joint product costs are relevant for any sell-or-process further decisions.

Any trade-in allowance or cash disposal value of the old asset is relevant in a retain orreplace equipment decision.

Which of the following is not a step in management’s decision-making process?

If revenues are $315,000 under alternative A and $324,000 under alternative B, and costs are $285,000 for A and $306,000 for B, then using the basic approach in incremental analysis, incremental revenues, costs, and net income, in comparing B to A are respectively

The cost to manufacture an unfinished unit is $120 ($90 variable, $30 fixed). The selling price per unit is $150. The company has unused productive capacity and has determined that units could be finished and sold for $195 with an increase in variable costs of 40%. What is the additional net income per unit to be gained by finishing the unit?

The potential benefit that may be obtained from following an alternative course of action is called

In a make or buy decision, the relevant costs include each of the following except the