Planning, Budgeting, and Forecasting

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Excellent work! This is a very strong performance — you clearly understand the material and are in full control.
Keep the momentum and aim to stay among the top performers.
If you continue with this level of seriousness, hitting 100% is only a matter of time!
Best of Luck!
Dr. Hesham Mokhiemer

ممتاز! أداء قوي جدًا… باين إنك فاهم ومسيطر على المادة بشكل رائع
Top Performers استمر بالشكل ده وخليك من الـ
لو تكمّل بنفس الجدية دي… الوصول للـ 100% ان شاء الله, مسألة وقت بس
تحياتي
د. هشام مخيمر
It’s clear you made an effort… but your real performance is still waiting to shine! 😄
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Go back over the material, ask questions, work on the weak areas… and I’m here to support you every step of the way!

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ولا تشيل هم—دي مجرد بداية. شوية تركيز ومراجعة إضافية وهتشوف الفرق بنفسك.
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Question 1 of 43

1. Question

All of the following are advantages of the use of budgets in a management control system except that budgets

Force management planning.
Correct Incorrect Correct answer

Provide performance criteria.
Correct Incorrect Correct answer

Promote communication and coordination within the organization.
Correct Incorrect Correct answer

Limit unauthorized expenditures.
Correct Incorrect Correct answer

Correct

Incorrect
Question 2 of 43

2. Question

In the budgeting and planning process for a firm, which one of the following should be completed first?

Sales budget.
Correct Incorrect Correct answer

Financial budget.
Correct Incorrect Correct answer

Cost management plan.
Correct Incorrect Correct answer

Strategic plan.
Correct Incorrect Correct answer

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Question 3 of 43

3. Question

Each organization plans and budgets its operations for slightly different reasons. Which one of the following is not a significant reason for planning?

Providing a basis for controlling operations.
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Forcing managers to consider expected future trends and conditions.
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Ensuring profitable operations.
Correct Incorrect Correct answer

Checking progress toward the objectives of the organization.
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Question 4 of 43

4. Question

Which one of the following is usually not cited as being an advantage of a formal budgetary process?

Forces management to evaluate the reasonableness of assumptions used and goals identified in the budgetary process.
Correct Incorrect Correct answer

Ensures improved cost control within the organization and prevents inefficiencies.
Correct Incorrect Correct answer

Provides a formal benchmark to be used for feedback and performance evaluation.
Correct Incorrect Correct answer

Serves as a coordination and communication device between management and subordinates.
Correct Incorrect Correct answer

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Question 5 of 43

5. Question

The major objectives of any budget system are to

Define responsibility centers, provide a framework for performance evaluation, and promote communication and coordination among organization segments.
Correct Incorrect Correct answer

Define responsibility centers, facilitate the fixing of blame for missed budget predictions, and ensure goal congruence between superiors and subordinates.
Correct Incorrect Correct answer

Foster the planning of operations, provide a framework for performance evaluation, and promote communication and coordination among organization segments.
Correct Incorrect Correct answer

Foster the planning of operations, facilitate the fixing of blame for missed budget predictions, and ensure goal congruence between superiors and subordinates.
Correct Incorrect Correct answer

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Question 6 of 43

6. Question

A budget helps a company control costs by setting cost guidelines. However, a budget also performs the function(s) of

Planning.
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Motivating.
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Communicating.
Correct Incorrect Correct answer

All of the answers are correct.
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Question 7 of 43

7. Question

When comparing performance report information for top management with that for lower- level management,

Top management reports are more detailed.
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Lower-level management reports are typically for longer time periods.
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Top management reports show control over fewer costs.
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Lower-level management reports are likely to contain more quantitative data and less financial data.
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Correct

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Question 8 of 43

8. Question

Which one of the following is not an advantage of a participatory budgeting process?

Coordination between departments.
Correct Incorrect Correct answer

Communication between departments.
Correct Incorrect Correct answer

Goal congruence.
Correct Incorrect Correct answer

Control of uncertainties.
Correct Incorrect Correct answer

Correct

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Question 9 of 43

9. Question

When developing a budget, an external factor to consider in the planning process is

A change to a decentralized management system.
Correct Incorrect Correct answer

The implementation of a new bonus program.
Correct Incorrect Correct answer

New product development.
Correct Incorrect Correct answer

The merger of two competitors.
Correct Incorrect Correct answer

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Question 10 of 43

10. Question

An advantage of participative budgeting is that it

Minimizes the cost of developing budgets.
Correct Incorrect Correct answer

Reduces the effect on the budgetary process of employee biases.
Correct Incorrect Correct answer

Yields information known to management but not to employees.
Correct Incorrect Correct answer

Encourages acceptance of the budget by employees.
Correct Incorrect Correct answer

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Question 11 of 43

11. Question

Which one of the following items would most likely cause the planning and budgeting system to fail? The lack of

Historical financial data.
Correct Incorrect Correct answer

Input from several levels of management.
Correct Incorrect Correct answer

Top management support.
Correct Incorrect Correct answer

Adherence to rigid budgets during the year.
Correct Incorrect Correct answer

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Question 12 of 43

12. Question

Which one of the following statements best describes budgetary slack?

The practice of management assigning relaxed budgetary goals after the company achieves the first several months of the annual budget.
Correct Incorrect Correct answer

The total amount that actual expenses are below budgeted expenses and actual revenues exceed budgeted revenues.
Correct Incorrect Correct answer

The practice of understating budgeted revenues or overestimating budgeted costs to make budgeted targets more achievable.
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The margin of error assigned to each cost center to encourage the manager to budget accurately and consistently.
Correct Incorrect Correct answer

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Question 13 of 43

13. Question

Jura Corporation is developing standards for the next year. Currently XZ-26, one of the material components, is being purchased for $36.45 per unit. It is expected that the component’s cost will increase by approximately 10% next year and the price could range from $38.75 to $44.18 per unit, depending on the quantity purchased. The appropriate standard for XZ-26 for next year should be set at the

Current actual cost plus the forecasted 10% price increase.
Correct Incorrect Correct answer

Lowest purchase price in the anticipated range to keep pressure on purchasing to always buy in the lowest price range.
Correct Incorrect Correct answer

Highest price in the anticipated range to ensure that there are only favorable purchase price variances.
Correct Incorrect Correct answer

Price agreed upon by the purchasing manager and the appropriate level of company management.
Correct Incorrect Correct answer

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Question 14 of 43

14. Question

When compared with ideal standards, practical standards

Produce lower per-unit product costs.
Correct Incorrect Correct answer

Result in a less desirable basis for the development of budgets.
Correct Incorrect Correct answer

Incorporate very generous allowance for spoilage and worker inefficiencies.
Correct Incorrect Correct answer

Serve as a better motivating target for manufacturing personnel.
Correct Incorrect Correct answer

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Question 15 of 43

15. Question

All of the following statements concerning standard costs are correct except that

Time and motion studies are often used to determine standard costs.
Correct Incorrect Correct answer

Standard costs are usually set for one year.
Correct Incorrect Correct answer

Standard costs can be used in costing inventory accounts.
Correct Incorrect Correct answer

Standard costs are usually stated in total, while budgeted costs are usually stated on a per-unit basis.
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Question 16 of 43

16. Question

The budget that describes the long-term position and objectives of an entity within its environment is the

Capital budget.
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Operating budget.
Correct Incorrect Correct answer

Cash management budget.
Correct Incorrect Correct answer

Strategic budget.
Correct Incorrect Correct answer

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Question 17 of 43

17. Question

Zohar Company’s budget contains the following information:

Zohar Company
	Units
Beginning finished goods inventory	85
Beginning work-in-process in equivalent units	10
Desired ending finished goods inventory	100
Desired ending work-in-process in equivalent units	40
Projected sales	1,800

How many equivalent units should Zohar plan to produce?

1,800

Correct Incorrect Correct answer

1,565

Correct Incorrect Correct answer

1,815

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1,845

Correct Incorrect Correct answer

Correct

Incorrect

Question 18 of 43

18. Question

Which one of the following statements regarding selling and administrative budgets is most accurate?

Selling and administrative budgets are usually optional.
Correct Incorrect Correct answer

Selling and administrative budgets are fixed in nature.
Correct Incorrect Correct answer

Selling and administrative budgets are difficult to allocate by month and are best presented as one number for the entire year.
Correct Incorrect Correct answer

Selling and administrative budgets need to be detailed in order that the key assumptions can be better understood.
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Question 19 of 43

19. Question

One of the final steps in completing a master budget is the preparation of a pro forma cash flow statement. This statement is intended to help users of financial statements

Evaluate a firm’s economic resources and obligations.
Correct Incorrect Correct answer

Evaluate a firm’s liquidity, solvency, and financial flexibility.
Correct Incorrect Correct answer

Determine a firm’s components of income from operations.
Correct Incorrect Correct answer

Determine whether or not accounts receivable are collectible.
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Question 20 of 43

20. Question

The cash budget must be prepared before the company can complete the

Capital expenditure budget.
Correct Incorrect Correct answer

Forecasted income statement.
Correct Incorrect Correct answer

Production budget.
Correct Incorrect Correct answer

Forecasted balance sheet.
Correct Incorrect Correct answer

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Question 21 of 43

21. Question

A production plan should be based on

A sales forecast adjusted for projected inventory levels.
Correct Incorrect Correct answer

Economic order quantities and reorder points.
Correct Incorrect Correct answer

Exponential smoothing.
Correct Incorrect Correct answer

Linear regression.
Correct Incorrect Correct answer

Correct

Incorrect
Question 22 of 43

22. Question

Pro forma financial statements are part of the budgeting process. Normally, the last pro forma statement prepared is the

Capital expenditure plan.
Correct Incorrect Correct answer

Income statement.
Correct Incorrect Correct answer

Statement of cost of goods sold.
Correct Incorrect Correct answer

Statement of cash flows.
Correct Incorrect Correct answer

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Question 23 of 43

23. Question

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

Rolling budget.
Correct Incorrect Correct answer

Kaizen budget.
Correct Incorrect Correct answer

Activity-based budget.
Correct Incorrect Correct answer

Flexible budget.
Correct Incorrect Correct answer

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Question 24 of 43

24. Question

The use of the master budget throughout the year as a constant comparison with actual results signifies that the master budget is also a

Flexible budget.
Correct Incorrect Correct answer

Capital budget.
Correct Incorrect Correct answer

Zero-base budget.
Correct Incorrect Correct answer

Static budget.
Correct Incorrect Correct answer

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Question 25 of 43

25. Question

Which one of the following budgeting methodologies would be most appropriate for a firm facing a significant level of uncertainty in unit sales volumes for next year?

Top-down budgeting.
Correct Incorrect Correct answer

Life-cycle budgeting.
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Static budgeting.
Correct Incorrect Correct answer

Flexible budgeting.
Correct Incorrect Correct answer

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Question 26 of 43

26. Question

A budgeting approach that requires a manager to justify the entire budget for each budget period is known as

Performance budgeting.
Correct Incorrect Correct answer

Program budgeting.
Correct Incorrect Correct answer

Zero-based budgeting.
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Incremental budgeting.
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Question 27 of 43

27. Question

Breakfast Anytime produces and sells eight different varieties of cereal. The company has eight marketing managers, each of whom is responsible for advertising one of the varieties. Historically, the company has budgeted advertising costs as 10% of each product’s anticipated revenues, and actual advertising costs have been very close to budgeted amounts, yielding very insignificant variances. In order to provide for a more efficient allocation of resources available for its advertising, Breakfast Anytime should

Implement a balanced scorecard.
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Implement flexible budgeting.
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Implement zero-based budgeting.
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Maintain the current system.
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Question 28 of 43

28. Question

The purpose of project budgeting is to identify, evaluate, and select beneficial projects that require

Large budgeted expenses on the income statement, and the appropriate time frame is over the project’s life cycle.
Correct Incorrect Correct answer

Large budgeted expenses on the income statement, and the appropriate time frame is the year being budgeted.
Correct Incorrect Correct answer

Commitments of large sums of funds, and the appropriate time frame is over the project’s life cycle.
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Commitments of large sums of funds, and the appropriate time frame is the year being budgeted.
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Question 29 of 43

29. Question

A company has accumulated data for the last 24 months in order to determine if there is an independent variable that could be used to estimate shipping costs. Three possible independent variables being considered are packages shipped, miles shipped, and pounds shipped. The quantitative technique that should be used to determine whether any of these independent variables might provide a good estimate for shipping costs is

Flexible budgeting.
Correct Incorrect Correct answer

Linear programming.
Correct Incorrect Correct answer

Linear regression.
Correct Incorrect Correct answer

Variable costing.
Correct Incorrect Correct answer

Correct

Incorrect
Question 30 of 43

30. Question

Correlation is a term frequently used in conjunction with regression analysis and is measured by the value of the coefficient of correlation, r. The best explanation of the value r is that it

Is always positive.
Correct Incorrect Correct answer

Interprets variances in terms of the independent variable.
Correct Incorrect Correct answer

Ranges in size from negative infinity to positive infinity.
Correct Incorrect Correct answer

Is a measure of the relative relationship between two variables.
Correct Incorrect Correct answer

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Question 31 of 43

31. Question

In the standard regression equation y = a + bx, the letter b is best described as a(n)

Independent variable.
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Dependent variable.
Correct Incorrect Correct answer

Constant coefficient.
Correct Incorrect Correct answer

Variable coefficient.
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Question 32 of 43

32. Question

The letter x in the standard regression equation (y = a + bx) is best described as a(n)

Independent variable.
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Dependent variable.
Correct Incorrect Correct answer

Constant coefficient.
Correct Incorrect Correct answer

Coefficient of determination.
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Question 33 of 43

33. Question

In determining cost behavior in business, the cost function is often expressed as y = a + bx. Which one of the following cost estimation methods should not be used in estimating fixed and variable costs for the equation?

Graphic method.
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Simple regression.
Correct Incorrect Correct answer

High and low point method.
Correct Incorrect Correct answer

Multiple regression.
Correct Incorrect Correct answer

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Incorrect
Question 34 of 43

34. Question

In order to analyze sales as a function of advertising expenses, the sales manager of Smith Company developed a simple regression model. The model included the following equation, which was based on 32 monthly observations of sales and advertising expenses with a related coefficient of determination of .90.

Sales = $10,000 + (2.5 × Advertising expenses)

If Smith Company’s advertising expenses in one month amounted to $1,000, the related point estimate of sales would be

$2,500
Correct Incorrect Correct answer

$11,250
Correct Incorrect Correct answer

$12,250
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$12,500
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Question 35 of 43

35. Question

Corrigon Industries is preparing a bid for a special project requiring the production of 35,000 units. The engineering personnel have advised that the units can be produced in groups with the first group consisting of 1,000 units. A review of prior experience indicates that the direct labor time needed per unit will be progressively smaller by a constant percentage rate as experience is gained in the production process. The quantitative method that would best estimate Corrigon’s total cost for the project is

Linear programming.
Correct Incorrect Correct answer

Dynamic programming.
Correct Incorrect Correct answer

Learning curve analysis.
Correct Incorrect Correct answer

Time series analysis.
Correct Incorrect Correct answer

Correct

Incorrect
Question 36 of 43

36. Question

A particular manufacturing job is subject to an estimated 90% learning curve. The first unit required 50 labor hours to complete. What is the cumulative average time per unit after four units are completed?

50.0 hours.
Correct Incorrect Correct answer

45.0 hours.
Correct Incorrect Correct answer

40.5 hours.
Correct Incorrect Correct answer

40.0 hours.
Correct Incorrect Correct answer

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Question 37 of 43

37. Question

A particular manufacturing job is subject to an estimated 80% learning curve. The first unit required 50 labor hours to complete. If the learning curve is based on a cumulative average time per unit assumption, what is the time required to complete the second unit?

30.0 hours.
Correct Incorrect Correct answer

40.0 hours.
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45.0 hours.
Correct Incorrect Correct answer

50.0 hours.
Correct Incorrect Correct answer

Correct

Incorrect
Question 38 of 43

38. Question

The technique used to predict the change in direct labor hours as a new process stabilizes is

Simple regression.
Correct Incorrect Correct answer

Multiple regression.
Correct Incorrect Correct answer

Time series analysis.
Correct Incorrect Correct answer

Learning curve analysis.
Correct Incorrect Correct answer

Correct

Incorrect
Question 39 of 43

39. Question

Which one of the following will allow a better use of standard costs and variance analysis to help improve managerial decision-making?

Company A does not differentiate between variable and fixed overhead in calculating its overhead variances.
Correct Incorrect Correct answer

Company B uses the prior year’s average actual cost as the current year’s standard.
Correct Incorrect Correct answer

Company C investigates only negative variances.
Correct Incorrect Correct answer

Company D constantly revises standards to reflect learning curves.
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Question 40 of 43

40. Question

Langley Corporation is developing a new product that will be manufactured in pairs. The company recently produced the first two units of this product using 200 hours of direct labor time. If Langley has a 90% learning curve and uses the cumulative average-time learning model, the total direct labor time to manufacture the first four units of this new product is

400 hours.
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380 hours.
Correct Incorrect Correct answer

360 hours.
Correct Incorrect Correct answer

324 hours.
Correct Incorrect Correct answer

Correct

Incorrect
Question 41 of 43

41. Question

Which one of the following best describes the role of top management in the budgeting process? Top management

Should be involved only in the approval process.
Correct Incorrect Correct answer

Lacks the detailed knowledge of the daily operations and should limit their involvement.
Correct Incorrect Correct answer

Needs to be involved, including using the budget process to communicate goals.
Correct Incorrect Correct answer

Needs to separate the budgeting process and the business planning process into two separate processes.
Correct Incorrect Correct answer

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Question 42 of 43

42. Question

In decision making under conditions of uncertainty, expected value refers to the

Likely outcome of a proposed action.
Correct Incorrect Correct answer

Present value of alternative actions.
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Probability of a given outcome from a proposed action.
Correct Incorrect Correct answer

Weighted average of probable outcomes of an action.
Correct Incorrect Correct answer

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Question 43 of 43

43. Question

When the value of X is 10, the estimated value of Y is

6.77
Correct Incorrect Correct answer

8.05
Correct Incorrect Correct answer

20.63
Correct Incorrect Correct answer

53.84
Correct Incorrect Correct answer

Correct

Incorrect

Planning, Budgeting, and Forecasting

Quiz Summary

Information

Information

Results

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Categories

1. Question

All of the following are advantages of the use of budgets in a management control system except that budgets

2. Question

In the budgeting and planning process for a firm, which one of the following should be completed first?

3. Question

Each organization plans and budgets its operations for slightly different reasons. Which one of the following is not a significant reason for planning?

4. Question

Which one of the following is usually not cited as being an advantage of a formal budgetary process?

5. Question

The major objectives of any budget system are to

6. Question

A budget helps a company control costs by setting cost guidelines. However, a budget also performs the function(s) of

7. Question

When comparing performance report information for top management with that for lower- level management,

8. Question

Which one of the following is not an advantage of a participatory budgeting process?

9. Question

When developing a budget, an external factor to consider in the planning process is

10. Question

An advantage of participative budgeting is that it

11. Question

Which one of the following items would most likely cause the planning and budgeting system to fail? The lack of

12. Question

Which one of the following statements best describes budgetary slack?

13. Question

14. Question

When compared with ideal standards, practical standards

15. Question

All of the following statements concerning standard costs are correct except that

16. Question

17. Question

Zohar Company’s budget contains the following information:

Zohar Company

Units

Beginning finished goods inventory

85

Beginning work-in-process in equivalent units

10

Desired ending finished goods inventory

100

Desired ending work-in-process in equivalent units

40

Projected sales

1,800

How many equivalent units should Zohar plan to produce?

18. Question

Which one of the following statements regarding selling and administrative budgets is most accurate?

19. Question

One of the final steps in completing a master budget is the preparation of a pro forma cash flow statement. This statement is intended to help users of financial statements

20. Question

The cash budget must be prepared before the company can complete the

21. Question

A production plan should be based on

22. Question

Pro forma financial statements are part of the budgeting process. Normally, the last pro forma statement prepared is the

23. Question

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

24. Question

The use of the master budget throughout the year as a constant comparison with actual results signifies that the master budget is also a

25. Question

Which one of the following budgeting methodologies would be most appropriate for a firm facing a significant level of uncertainty in unit sales volumes for next year?

26. Question

A budgeting approach that requires a manager to justify the entire budget for each budget period is known as

27. Question

28. Question

The purpose of project budgeting is to identify, evaluate, and select beneficial projects that require

29. Question

30. Question

Correlation is a term frequently used in conjunction with regression analysis and is measured by the value of the coefficient of correlation, r. The best explanation of the value r is that it

31. Question

In the standard regression equation y = a + bx, the letter b is best described as a(n)

32. Question

The letter x in the standard regression equation (y = a + bx) is best described as a(n)