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Accounting: What the Numbers Mean, 5/e

David H. Marshall, Millikin University
Wayne W. McManus, International College of the Cayman Islands
Daniel F. Viele, Webster University

Cost Analysis for Planning

Multiple Choice Quiz

Please answer all questions


1	Which of the following is not a benefit of budgeting?
		A)	Budgeting provides benchmarks against which performance can be measured.
		B)	Budgeting forces managers to concentrate on planning and to formalize their planning efforts.
		C)	Budgeting helps managers build favorable variances into the performance evaluation process.
		D)	Budgeting requires different functional areas of the firm to communicate and coordinate activities.
		E)	All of the above are benefits of budgeting.


2	When costs are classified according to a time-frame perspective:
		A)	All costs are non-controllable.
		B)	Costs are labeled direct or indirect.
		C)	The focus is on differential costs.
		D)	Costs are labeled committed or discretionary.
		E)	All costs are controllable.


3	The cash budget is prepared:
		A)	Concurrently with the sales forecast.
		B)	Based upon the purchases/production budget.
		C)	After the budgeted income statement.
		D)	From the budgeted balance sheet.
		E)	Independently from the other budgets.


4	The key data element on which the entire budget is based is the:
		A)	Sales/revenue budget.
		B)	Production budget.
		C)	Income statement budget.
		D)	Cash budget.
		E)	Budgeted balance sheet.


5	Which of the following is the last budgeted financial statement to be prepared?
		A)	Budgeted income statement.
		B)	Budgeted balance sheet.
		C)	Cash budget.
		D)	It doesn't matter which one is prepared last.
		E)	None of the above.


6	Operating expenses are best budgeted on the basis of knowledge about:
		A)	Cost behavior patterns.
		B)	Relevant range.
		C)	Prior period actual expenses.
		D)	Prior period budget amounts.
		E)	Current period budget amounts.


7	The amount of production to budget would be calculated as:
		A)	BI + sales - EI
		B)	EI + sales - BI
		C)	EI + BI - sales
		D)	Sales - BI + purchases
		E)	Sales - purchases


8	A continuous budget:
		A)	Is used only in manufacturing firms.
		B)	Is a budget that is computer generated and is based on last year's actual results.
		C)	Is a budget that is revised monthly by adding a new month at the end of the 12-month budget period.
		D)	Requires adjustments on a daily basis.
		E)	None of the above.


9	A standard cost:
		A)	Is a budget for a single unit of product.
		B)	Is used for product costing purposes.
		C)	Identifies the price and quantity of production resources that should be incurred to produce each unit of product.
		D)	Can be used by manufacturing firms and service organizations.
		E)	All of the above.


10	Attainable standards, as compared to ideal standards:
		A)	Do not allow for operating inefficiencies.
		B)	Are more likely to elicit employee enthusiasm.
		C)	Are more difficult to adjust for changes in worker efficiency.
		D)	Are more difficult to achieve.
		E)	All of the above.

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