Finance
CHAPTER 6: MASTER BUDGET AND RESPONSIBILITY ACCOUNTING
TRUE/FALSE
1. Few businesses plan to fail, but many of those that flop have failed to plan.
Answer: True Difficulty: 1 Objective: 1
2. The master budget reflects the impact of operating decisions, but not financing decisions.
Answer: False Difficulty: 1 Objective: 1 The master budget reflects the impact of operating decisions and financing decisions.
3. Budgeted financial statements are also referred to as pro forma statements.
Answer: True Difficulty: 1 Objective: 1
4. Budgeting includes only the financial aspects of the plan and not any nonfinancial aspects such as the number of physical units manufactured.
Answer: False Difficulty: 2 Objective: 1 Budgeting includes both financial and nonfinancial aspects of the plan.
5. Budgeting helps management anticipate and adjust for trouble spots in advance.
Answer: True Difficulty: 1 Objective: 1
6. Budgets can play both planning and control roles for management.
Answer: True Difficulty: 1 Objective: 1
7. To create greater commitment to the budget, top-management should create the budget and then share it with lower-level managers.
Answer: False Difficulty: 3 Objective: 2 To create greater commitment to the budget, lower-level managers should participate in creating the budget.
8. After a budget is agreed upon and finalized by the management team, the amounts should not be changed for any reason.
Answer: False Difficulty: 2 Objective: 2 Budgets should not be administered rigidly, but rather should be adjusted for changing conditions.
9. Even in the face of changing conditions, attaining the original budget is critical.
Answer: False Difficulty: 3 Objective: 2 Changing conditions usually call for a change in plans. Attaining the budget should not be an end in itself.
10. A four-quarter rolling budget encourages management to be
TRUE/FALSE
1. Few businesses plan to fail, but many of those that flop have failed to plan.
Answer: True Difficulty: 1 Objective: 1
2. The master budget reflects the impact of operating decisions, but not financing decisions.
Answer: False Difficulty: 1 Objective: 1 The master budget reflects the impact of operating decisions and financing decisions.
3. Budgeted financial statements are also referred to as pro forma statements.
Answer: True Difficulty: 1 Objective: 1
4. Budgeting includes only the financial aspects of the plan and not any nonfinancial aspects such as the number of physical units manufactured.
Answer: False Difficulty: 2 Objective: 1 Budgeting includes both financial and nonfinancial aspects of the plan.
5. Budgeting helps management anticipate and adjust for trouble spots in advance.
Answer: True Difficulty: 1 Objective: 1
6. Budgets can play both planning and control roles for management.
Answer: True Difficulty: 1 Objective: 1
7. To create greater commitment to the budget, top-management should create the budget and then share it with lower-level managers.
Answer: False Difficulty: 3 Objective: 2 To create greater commitment to the budget, lower-level managers should participate in creating the budget.
8. After a budget is agreed upon and finalized by the management team, the amounts should not be changed for any reason.
Answer: False Difficulty: 2 Objective: 2 Budgets should not be administered rigidly, but rather should be adjusted for changing conditions.
9. Even in the face of changing conditions, attaining the original budget is critical.
Answer: False Difficulty: 3 Objective: 2 Changing conditions usually call for a change in plans. Attaining the budget should not be an end in itself.
10. A four-quarter rolling budget encourages management to be