1. Budgets are statements of management’s
plans stated in financial terms.

2. A benefit of budgeting is that it provides
definite objectives for evaluating performance.

3. A budget can be a means of communicating a
company’s objectives to external parties.

4. A budget can be used as a basis for
evaluating performance.

5. A well-developed budget can operate and
enforce itself.

6. The budget itself and the administration of
the budget are the responsibility of the accounting department.

7. Effective budgeting requires clearly
defined lines of authority and responsibility.

8. The flow of input data for budgeting should
be from the highest levels of responsibility to the lowest.

9. Budgets can have a positive or negative
effect on human behavior depending on the manner in which the budget is
developed and administered.

10. A budget can facilitate the coordination of
activities among the segments of a large company.

11. The longer the budget period, the more
reliable the estimates of future outcomes.

12. The budget committee has the responsibility
for coordinating the preparation of the budget.

13. The budget is developed within the
framework of a sales forecast.

14. Budgeting and long-range planning are two
terms that describe the same process.

15. Long-range plans are used more as a review
of progress toward long-term goals rather than an evaluation of specific
results to be achieved.

16. The master budget reflects management’s
long-term plans encompassing five years or more.

17. The master budget consists of operating and
financial budgets.

18. Financial budgets must be completed before
the operating budgets can be prepared.

19. The direct materials budget must be
completed before the production budget because the quantity of materials
available for production must be known.

20. The number of direct labor hours needed for
production is obtained from the production budget.

21. A manufacturing overhead budget is not
needed if the company develops a predeter-mined overhead rate to apply

22. The manufacturing overhead budget generally
has separate sections for variable, mixed, and fixed costs.

23. A production budget should be prepared
before the sales budget.

24. The direct materials budget contains both
quantity and cost data.

25. The budgeted income statement indicates the
expected profitability of operations for the next year.

26. If
a monthly cash budget is prepared properly, there will never be a cash
deficiency at the end of any month.

27. The budgeted balance sheet is prepared
entirely from the budgets for the current year.

28. The starting point when budgeting for a
not-for-profit organization is generally to budget expenditures first.

29. A merchandiser has a merchandise purchases
budget rather than a production budget.

30. A critical factor in budgeting for a
service firm is to determine the amount of products to purchase.

31. The
budget itself and the administration of the budget are entirely accounting

32. Financial planning
models and statistical and mathematical techniques may be used in forecasting

33. The direct materials
budget is derived from the direct materials units required for production plus
desired ending direct materials units less beginning direct materials units.

34. The manufacturing
overhead budget shows the expected manufacturing overhead costs.

35. In order to develop
a budgeted balance sheet, the previous year’s balance sheet is needed.

36. In service
enterprises, the critical factor in budgeting is coordinating materials and
equipment with anticipated services.

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