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Jacket
Management Accounting
Willie Seal, University of Essex, UK
Ray Garrison, Brigham Young University, Provo, Utah, USA
Eric Noreen, INSEAD, France
Profit Planning and the role of budgeting

Self-test Questions



1

One of the following statements is not a benefit of budgeting
(Learning Objective 1 Ch 12)
A)It helps with communications between members of the organisation
B)It forces managers to think and plan for the future
C)It helps with allocating resources to places where they are needed
D)It means that in all cases budgets are not based on previous ones
2

One of the following statements is not a benefit of budgeting
(Learning Objective 1 Ch 12)
A)Every person in the organisation will understand the prepared budget
B)Goals and objectives can be set as benchmarks
C)Coordination between different sections can be improved
D)Potential bottle necks can be uncovered
3

One of the following is not a disadvantage of budgeting
(Learning Objective 1 Ch 12)
A)Pseudo-participation
B)Budgeting cannot be used for “not for profit” organisations
C)A lack of understanding of budgeting by some of the participants
D)Some accountants regarding the figures in the budgets as their own property
4

One of the following is not a feature of responsibility accounting
(Learning Objective 1 Ch 12)
A)It prevents things “falling between” people
B)Each line item in the budget is made the responsibility of one of the managers
C)One of the purposes is to penalise managers for missing targets
D)The managers should correct any unfavourable variances on their own initiative
5

Which one of the following is not a basic premise of responsibility accounting?
(Learning Objective 1 Ch 12)
A)Budget data can be a basis for evaluating performance
B)Costs can be organised in levels of management responsibility
C)Managers are only made responsible for costs under their control
D)The managers in all cases must participate in the setting of the budget
6

One of the following is not cited as a feature of the self imposed budget
(Learning Objective 1 Ch 12)
A)Participants are more likely to blame others when things go wrong
B)Participants closer to the activities are likely to know more about the figures
C)Participants are likely to feel more fulfilled
D)Participants are likely to feel more valued
7

The ideal level of targets for motivational purposes in a budget is
(Learning Objective 1 Ch 12)
A)Very high
B)Just within reach
C)Very Low
D)None of these
8

The first budget in the budgeting process is normally the ………. budget
(Learning Objective 2 Ch 12)
A)Purchases
B)Sales
C)Production
D)Cash
9

Which of the following statements are untrue. All sections of a master budget ……
(Learning Objectives 3-10 Ch 12)
A)must be prepared separately
B)depend on the limiting factor if one exists
C)depend on each other
D)must be worked out step by step in order
10

One of the following statements about Zero Based Budgeting is untrue
(Learning Objective 10 Ch 12)
A)It has been accused of being too costly
B)It has been accused of being too time consuming
C)It involves starting from scratch each time
D)It is justified in each situation
11

One of the following is not a feature of international budgeting
(Learning Objective 10 Ch 12)
A)There may be problems with currency translation
B)Hedging helps currency exposure
C)Head office normally have good knowledge of local conditions
D)Local problems exist such as hyper inflation






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