Chapter 6

10 Questions  I  By Kaiwenz
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  • 1. 
    The cash flow statement does NOT include:
    • A. 

      Interest paid and received

    • B. 

      Cash inflows from the collection of receivables

    • C. 

      All sales revenues

    • D. 

      Cash outflows paid toward raw material purchases


  • 2. 
    A master budget:
    • A. 

      Should not be altered after it has been agreed upon

    • B. 

      Is an aid to coordinating what needs to be done to implement a plan

    • C. 

      Includes broad expectations and visionary results

    • D. 

      Includes only financial aspects of a plan and excludes nonfinancial aspects


  • 3. 
    A stretch budget is a budget that:
    • A. 

      Is designed to include the effects of exchange rate fluctuations

    • B. 

      Is impossible to implement in a cost center

    • C. 

      Represents a challenging, but achievable level of performance

    • D. 

      Crosses more than one responsibility center


  • 4. 
    A limitation of comparing a company's performance against actual results of last year is that:
    • A. 

      Past results can contain inefficiencies of the past year

    • B. 

      Feedback is no longer a possibility

    • C. 

      The budgeting time period is set at one year

    • D. 

      It includes adjustments for future conditions


  • 5. 
    The cash budget is a schedule of expected cash receipts and disbursements that:
    • A. 

      Is prepared immediately after the sales forecast

    • B. 

      Requires an aging of accounts receivable and accounts payable

    • C. 

      Predicts the effect on the cash position at given levels of operations

    • D. 

      Is a self-liquidating cycle


  • 6. 
    A budget can help implement:
    • A. 

      Long-run planning

    • B. 

      Strategic planning

    • C. 

      Short-run planning

    • D. 

      All of these answers are correct.


  • 7. 
    All of the following are encouraged with kaizen budgeting EXCEPT:
    • A. 

      Cost reductions during manufacturing

    • B. 

      Better interactions with suppliers

    • C. 

      Systematic monthly cost reductions

    • D. 

      Large discontinuous improvements


  • 8. 
    Budgeting provides all of the following EXCEPT:
    • A. 

      Support for the management functions of planning and coordination

    • B. 

      An ethical framework for decision making

    • C. 

      A means to communicate the organization's short-term goals to its members

    • D. 

      A means to anticipate problems


  • 9. 
    To reduce budgetary slack management may:
    • A. 

      Award bonuses for achieving budgeted amounts

    • B. 

      Incorporate stretch or challenge targets

    • C. 

      Reduce projected cost targets by 10% across all areas

    • D. 

      Use external benchmark performance measures


  • 10. 
    A company's actual performance should be compared against budgeted amounts for the same accounting period so that:
    • A. 

      Adjustments for future conditions can be included

    • B. 

      A rolling budget can be implemented

    • C. 

      No feedback is possible

    • D. 

      Inefficiencies of the past year can be included


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