FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
Which of the following statements about budgets is FALSE ?
Budgets help the company manage risks .
Incurring actual costs at a level in excess of the amount in the flexible budget for the actual level of operation always results in an unfavorable variance
Budgets help move the company from an informal reactive style to a more formal proactive style of management
Incurring actual costs at a level in excess of the amount planned in the original static budget always results in a favorable variance .
Budgets help establish responsibility and evaluate managers performance .
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- Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forwardVikramarrow_forwardIncremental budgets encourage managers to over-estimate output to increase their budgets. True Falsearrow_forward
- What is a concept of budgeting that requires all levels of management to start from zero and estimate budget data as if there had been no previous activities in their units called? Group of answer choices zero-based budgeting static budgeting cautious budgeting continuous budgetingarrow_forwardWhich of the following statements is true? It is recommended when making a budget to incorporate a conservative amount of slack to account for unexpected events. An example of an unfavorable variance is when actual expenses are less than budgeted expenses. Budgets are estimates for revenue and expenditures that are used to set, achieve, and evaluate an organization’s goals. Static budgets are generated at the beginning of the year and then subsequently updated for the actual level of volume that occurs during the period. An example of a favorable variance is when actual revenue is less than budgeted revenue.arrow_forwardNote:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- Which ONE of the following is true? a. Assume all costs are fixed when creating a flexible budget b. None of the other available answers are true c. There can only be one cost driver d. Unfavorable activity variances for costs will typically accompany a favorable activity variance for revenue. e. Variances are classified according to the impact on revenue f. Assume all costs are variable when creating a flexible budgetarrow_forward1. A budget is a detailed financial plan that quantifies future expectations and actions relative to acquiring and using resources. a. True b. False 2. Budgets should not be used to provide managers with “pre-approval” for the execution of spending plans. a. True b. False 3. A flexible budget is not designed to change with changes in activity level. a. True b. False 4. The production budget comes before the materials purchases budget. a.True b. False 5. The starting point for the master budget is an assessment of anticipated production next year. a. False b. Truearrow_forwardBudgets need to be fair and attainable for employees to consider the budget important in their normal daily activities. Which of the following is not considered a human behavior problem? Allowing employees the opportunity to be a part of the budget process Allowing goals to be so low that employees develop a "spend it or lose it" attitude Setting goals too tightly making it difficult to meet performance expectation Setting goals among managers that conflict with one anotherarrow_forward
- What does a flexible budget performance report do that a simple comparison of budgeted to actual results does not do?arrow_forwardWhich of the following statements is not correct? The revenue budget is the starting point in preparing the master budget. The revenue budget is constructed by multiplying the expected sales in units by the sales price. The production budget is not based on the revenue budget. The cash budget is used to determine whether the firm will have enough cash on hand.arrow_forwardWhy is the identification of favorable and unfavorable variances so important to a company? How can the identification of the variances help management control costs? Please explain. Considering the flexible budgeting topic, it is important to look at this analysis as a significant contribution to the management of the company. Knowing what the bottom line profit or loss is important. But what is more important is to understand how your actual results varied in terms of units sold versus how the actual cost of each unit differed from the budget. What is a good example of this?arrow_forward
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