Homework 1

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Chapter 07 … Master Budgets and Performance Planning

1. A budget is a formal statement of future plans, usually expressed in monetary terms.

2. Continuous budgeting is the practice of preparing a new budget for a selected number of future periods and revising those budgets as each period is completed.

3. Budget preparation is best determined in a top-down managerial approach.

4. The master budget consists of three major groups of budget components: the operating budgets, the capital expenditures budgets, and the financial budgets.

5. The budget process is a continuous activity of planning, revising, and evaluating business activities.

6. A cash budget is a plan that includes the expected cash
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On December 31, the accounts receivable balance includes $12,000 from November sales and $42,000 from December sales.

Assume that total sales for January are budgeted to be $50,000. What are the expected cash receipts for January from the current and past sales? A. $18,500 B. $51,500 C. $51,900 D. $55,500 E. $60,500

Chapter 08 … Flexible Budgets and Standard Costing

17. Standard costs can serve as a basis for evaluating actual performance.

18. Within the same budget performance report, it is impossible to have both favorable and unfavorable variances.

19. A cost variance equals the sum of the quantity variance and the price variance.

20. An overhead cost variance is the difference between the actual overhead incurred for the period and the standard overhead applied.

21. A flexible budget expresses all costs on a per unit basis.

22. A favorable direct materials price variance might lead to an unfavorable direct materials quantity variance because the company purchased cheap materials.

23. One possible explanation for direct labor rate and efficiency variances is the use of workers with different skill levels.

24. A volume variance is the difference between overhead at maximum production volume and that at the budgeted production volume.

25. Standard costs

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