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| 1.
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The process of planning future business actions and expressing those plans in a formal manner, usually in monetary terms, is called budgeting. |
| | A) | True |
| | B) | False |
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| 2.
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The budgeting process can be used to promote a positive effect on employees' attitudes, but it can also yield a negative one. |
| | A) | True |
| | B) | False |
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| 3.
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The task of preparing the budget normally is the responsibility of one department, the controller's department or a department of one of the high-level managers. |
| | A) | True |
| | B) | False |
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| 4.
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Most successful businesses generally prepare their budgets from 'the top down'. These budgets are tightly controlled by upper management. |
| | A) | True |
| | B) | False |
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| 5.
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Since the budget period normally coincides with the accounting period, budgets of less than one year or greater than one year are not normally prepared. |
| | A) | True |
| | B) | False |
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| 6.
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When a company adds one increment of time to its budget period as one increment of time expires, it is practicing continuous budgeting. |
| | A) | True |
| | B) | False |
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| 7.
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The cash budget is a financial budget. |
| | A) | True |
| | B) | False |
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| 8.
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The operating budgets provide all of the information necessary for the preparation of the budgeted income statement. |
| | A) | True |
| | B) | False |
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| 9.
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Normally, the cash budget is the first subbudget prepared in the process of developing the master budget. |
| | A) | True |
| | B) | False |
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| 10.
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A quantity of merchandise or materials that is held as inventory to compensate for unexpected demand or delays in receipts from suppliers is called the just-in-time inventory stock. |
| | A) | True |
| | B) | False |
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| 11.
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The total amount of budgeted expenses from the selling budget and the general and administrative budget are shown as disbursements in the cash budget. |
| | A) | True |
| | B) | False |
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| 12.
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The general and administrative expense budget should include any amortization on equipment used by either function. |
| | A) | True |
| | B) | False |
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| 13.
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The ending cash balance of the cash budget should be equal to the net income shown on the budgeted income statement. |
| | A) | True |
| | B) | False |
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| 14.
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When a company starts each budgeting period at 'ground zero', the budgets are prepared as if they are the first budget prepared for the company. |
| | A) | True |
| | B) | False |
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| 15.
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The manufacturing budget is a statement of the estimated cost of materials to produce a product. |
| | A) | True |
| | B) | False |
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| 16.
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The production budget for a manufacturer and the merchandise purchases budget for a retailer are similar in structure and content--both show the cost of obtaining the product to be sold or manufactured. |
| | A) | True |
| | B) | False |
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| 17.
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The direct materials budget shows the amount of cash outflow for the purchase of direct materials over the period of the budget. |
| | A) | True |
| | B) | False |
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| 18.
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The production budget, direct materials budget, direct labour budget, and manufacturing overhead budget are all tied to the projections in the sales budget. |
| | A) | True |
| | B) | False |
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| 19.
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Rolling budgets are budgets that are periodically revised in the process of continuous budgeting. Management is continuously planning ahead. |
| | A) | True |
| | B) | False |
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| 20.
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A cash budget should be prepared first before the capital expenditures budget. It shows how much cash is available for investing in capital assets. |
| | A) | True |
| | B) | False |
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| 21.
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Activity-based budgeting (ABB) is a tool that uses the concepts of activity-based costing to enhance the budgeting process. An ABB system can provide a strong basis for zero-based budgeting. |
| | A) | True |
| | B) | False |
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| 22.
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The master budget includes two primary categories of budgets: (1) operating budgets, and (2) financial budgets. |
| | A) | True |
| | B) | False |
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