the sales An entity would typically prepare the production budget prior to prepa

Question

the sales An entity would typically prepare the production budget prior to preparing budget. Question 1-45 are each work one point for a grand total of 45 pdl I. True False ng of many separate budgets that are 2. The master budget is a network consisti interdependent to each other. True False 3. The budgeting process reduces the need for tracking actual cost activity and variances. True False nparing a static planning budget to actual costs is a good way to assess whether True False variable costs are under control. 5. Fixed costs should be included in a flexible budget even though they do not change when the level of activity changes. True False 6. A spending variance is the difference between the cost in the static planning budget and the actual amount of the cost for the period. True False 7. A static planning budget is suitable for planning but is inappropriate for evaluating how well costs are controlled. True False 8. Ideal standards should be used in standard costing not practical standards. True False 9. The standard price per unit for direct materials should reflect the final, delivered cost of the materials, net of any discounts taken. True False

Explanation / Answer

1. FALSE

sales budget is made prior to any other budget like expenses or production budget. By preparing sales budget Company's goals are outlined in business plan and managers are expected to create sales first.

2. TRUE

Master budget consists of separate budgets lime direct labour hours, direct material , variable expenses budget etc which are interdependent to each other.

3. FALSE

Budgeting is just a forecast to company's performance. Even after preparing budget company need to continuously evaluate and track actual costs.

4. TRUE

Comparing budget and actual costs lead to correct evaluation of Variable Costs under control.

5. TRUE

Fixed costs should form part pf Flexible budgets because they may change for other reasons regardless of change in different levels of activity.

6. FALSE

Spending Variance is difference between how much cost should have been charged and actual amount of Costs incurred.

7. FALSE

Static planning budget most effectively assess managers performance and evaluate how well costs are controlled.

8. TRUE

As ideal standards reflect continous improvement &high quality.

9. TRUE

Standard prices must be taken at Net figures.

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