Question

Evaluate whether each statement is true or false.

1. A benefit of self-imposed budgets is that managers are able to create some budgetary slack to ensure the company is able to meet its targets.                            [ Select ]                       ["True", "False"]      

2. Good budgeting systems must have two key components: good planning regarding goals and  effective control over the execution.                            [ Select ]                       ["True", "False"]          

3. If the actual level of activity is 12% higher than planned, all costs in the static budget should be increased by 12% before comparing them to actual costs.                             [ Select ]                       ["False", "True"]      

4. Both traditional and ROTH IRAs have tax benefits; however, ROTH IRAs are the better option because the earnings are never taxed.                            [ Select ]                       ["False", "True"]      

5. Budget estimates prepared by front-line managers are often more accurate and reliable than estimates prepared by top managers of the company.

Answer 1

1. A benefit of self-imposed budgets is that managers are able to create some budgetary slack to ensure the company is able to meet its targets. - True

Since the manager who creates the budget will be held accountable for actual results that deviate from budget, hence managers create some slack to ensure that company is able to meet its targets.

2.  Good budgeting systems must have two key components: good planning regarding goals and  effective control over the execution - True

When a budget is properly planned & executed, the actual results do not deviate much from the budget.

3. If the actual level of activity is 12% higher than planned, all costs in the static budget should be increased by 12% before comparing them to actual costs. - False

Because static budget is not changed for changes in the activity.

4. Both traditional and ROTH IRAs have tax benefits; however, ROTH IRAs are the better option because the earnings are never taxed. - True

Roth IRA are tax free hence it is a better option than traditional IRA.

5. Budget estimates prepared by front-line managers are often more accurate and reliable than estimates prepared by top managers of the company. - False

Because it may fail to support the organization's strategy.