BUDGETING METHODS

The type of budget that is available on a continuous basis for a specified future period by adding a month, a quarter, or a year in the future as the month, quarter, or year just ended is deleted is called a:

Rolling budget.

The type of budget that is continually updated to add a new budget period as the most recent budget period is completed is called a(n):

Rolling budget

A method of budgeting in which the cost of each program must be justified, starting with the one most vital to the company, is:

Zero-based budgeting (ZBB)

Comparing actual results to a budget based on actual volume and standard costs is possible with the use of a:

Flexible budget

The master budget process usually begins with the:

Sales budget

Which one of the following statements regarding the difference between a flexible budget and a static budget is correct?

A flexible budget provides cost allowances for different levels of activity whereas a static budget provides costs for one level of activity.

A companyʹs board of directors has requested a full, in-depth review of all budgeted items for next fiscal yearʹs operating budget. The controller of the company subsequently advised all business unit heads that the company will not automatically approve operating budget items for next fiscal year simply because they were approved in the past, and that all operating budget items for next fiscal year will need to be justified. Based on the above information, which one of the following budgeting systems is the company most likely using?

Zero-based budgeting

A firm wants to make a clear connection between resource consumption and output, and thinks that one process is best measured in machine-hours while another is best measured in number of setups. Which of the following systems would allow such options?

Activity-based budgeting

$42700

The financial budget process includes:

All of the above

A company prepared a master budget based on 100 budgeted sales units with a $100 sales price per unit, a variable cost per unit of $50, and $2,000 in total fixed cost. The actual sales quantity was 70 units. When preparing a flexible budget, the operating income is:

$1500

A plan that is created using budgeted revenue and costs but is based on the actual units of output is known as a:

Flexible budget

Which one of the following items is the last schedule to be prepared in the normal budget preparation process?

Cash budget

A budget that accommodates many levels of production volume is a:

Flexible budget

A master budget is most useful for identifying:

The expected relationship among sales, production, and cash budgets for the year.

The Bronx Corporation is a manufacturing company with a budgeting system that includes a master budget and flexible budgets for various

levels of production. Which of the following statements is/are correct?

I. Master budgets are normally confined to a single year for a single level of activity.

II. Flexible budgets are financial plans prepared in a manner that allows for adjustments for changes in production or sales and accurately reflects expected costs for the adjusted output.

III. Normally, the first step in the preparation of Bronx's master budget for a year would be the preparation of its production budget.

IV. The success of Bronx's budgeting program will depend on the degree to which its top management accepts the program and how its management uses the budgeted data.

I, II, and IV are correct.

Individual budget schedules are prepared to develop an annual comprehensive or master budget. The budget schedule that would provide the necessary input data for the direct labor budget would be the:

Production budget

Stumphouse Cheese is in the process of implementing a cost improvement system with kaizen costing as the basis for budgeting all manufacturing activities. This will be utilized over the next four years in an attempt to become more profitable. The target reduction rate has been set at 5 percent of fixed overhead costs. Total fixed overhead costs for this year were $900,000. What is the budgeted amount for the next two years using kaizen costing?

Current year + 1 = $855,000; Current year + 2 = $812,250

Which of the following budgeting methods establishes a base cost budget for a particular level of output plus a marginal cost‐volume amount that shows the behavior of costs at various volumes?

Flexible budgeting

Which of the following statements is correct regarding the drivers of operating and financial budgets?

.The sales budget will drive the cost of goods sold budget.

The starting point for creating a master budget for a private technical institute would be: