21. The preparation of a budgeted balance sheet requires consideration of the budgeted capital expenditures and budgeted net income.
22. A debt service budget summarizes cash payments required for interest, and includes those required to pay down principal.
23. If a budget is to provide a basis for evaluating departmental performance, departmental managers should not know what their budget targets are until after the budget period has ended.
24. Flexible budgeting may be viewed as combining the concepts of budgeting with cost-volume-profit analysis.
Multiple Choice Questions
25. A budget that adds a new month when the current month ends is called a:
A. Capital budget.
B. Master budget.
C. Rolling budget.
D. There is no such budget.
26. The benefits of budgeting include all of the following except:
A. Enabling the company to produce more for less cost.
B. Assigning responsibility for situations that require corrective action.
C. Coordinating activities between departments within the organization.
D. Creating standards for evaluating performance.
27. A master budget usually includes all of the following except:
A. A sales forecast.
B. A cash budget.
C. A projected tax return.
D. Projected financial statements.
28. A master budget can be used as a(n):
A. Aid to planning.
B. Evaluation tool.
C. Means to coordinate activities.
D. All of the above.
29. As the volume of output increases:
A. Variable costs per unit will increase.
B. Variable costs per unit will decrease.
C. Variable costs per unit will not change.
D. Variable costs in total will decrease.
30. As the volume of output decreases:
A. Fixed costs per unit will increase.
B. Fixed costs per unit will decrease.
C. Fixed costs per unit will not change.
D. Fixed costs in total will decrease.