Part I (10 points) 1. All the following are considered to be benefits of partici

Question

Part I (10 points) 1. All the following are considered to be benefits of participative budgeting. except for: a. Individuals at all organizational levels are recognized as being part b. The budget estimates are prepared by those in direct contact with c. When managers set their own targets for the budget, top of a team; this results in greater support of the organization. various activities management need not be concerned with the overall profitability of operations. Managers are held responsible for reaching their goals and cannot easily shift responsibility by blaming unrealistic goals demanded by the budget. d. 2. Preparing a budget allows managers to a. Plan for the future. b. Reduce the need for knee-jerk responses to unexpected situations. c. Assess whether a division's strategic direction is in line with corporate strategy. d. All of the above. Undesirable behavior is especially common in a bottom-up budget environment because a. Managers may be required to explain unfavorable outcomes 3. whether or not they are in control of the factors that caused the outcomes Managers have the ability to include budgetary slack to increase his or her changes of beating the budget. b. c. Both a and b. d. Neither a nor b. In order to prepare the sales budget, one needs a. The number of units expected to be produced and the prices 4. b. The number of units expected to be sold and the cost of producing c. The number of units expected to be sold and the prices expected to d. The number of units sold in the previous period and the price expected to be charged. each unit. be charged. charged for the units.

Explanation / Answer

Answer

1.

All statement are correct except:

C.When managers set their own targets for the budget, top management need not be concerned with the overall profitability of operations.

Because

It is not a benfit that Top management will not be concerned as targets set by managers. Top managements is responsible for overall performance of the company and they have their targets too.

2.

Preparing a budget allows management to

                (A) Plan for the future.

Reason:- Budget is a quantitative expression of a plan for a defined period of time not a response to unexpected situation or assess of a strategic direction.

3.

C. Both A and B

The combination of managers being required to explain unfavorable outcomes, whether or not they are in control of the factors that caused the outcomes; and managers can include budgetary slack to improve the likelihood of beating the budget.

4.

C. The number of units expected to be sold and the prices expected to be charged.

Sales budget is the first and basic component of master budget and it shows the expected number of sales units of a period and the expected price per unit. It also shows total sales which are simply the product of expected sales units and expected price per unit.

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