Question

Which of the following is correct about budgetary slack?

-Managers may include budgetary slack by overstating budgeted sales figures.

-Budgetary slack helps managers make responsible spending decisions since it removes performance evaluations based on budgeting.

-budgetary slack is a bit of cushion built into a budget, making it more likely budgetary goals will be met.

-Managers may include budgetary slack by understating budgeted expense figures.

Which of the following is not a benefit of budgeting?

-It servers an important role in motivating and rewarding employees.

-if forces managers to look to the future.

-it builds organizational slack.

-it plays an important role in communication within the organization.

Which of the following statements is true about the strategic plan?

-it is management’s vision of what they desire the organization to achieve over the long term.

-it is created by employees of a company and shared with management for execution.

-it is created as a thought exercise for long-term planning purposes, but it does not relate to daily activities.

-it is management’s vision of individual professional development goals over the long term.

The difference between the actual price and the standard price, multiplied by the actual quantity of materials purchased is the:

-direct materials quantity variance.

-dire materials volume variance.

-direct materials price variance.

-direct materials spending variance.

Which of the following sequences is correct?

-Cash receipts budget – sales budget – production budget – budgeted income statement.

-inventory budget – production budget – sales budget – selling and administrative budget

-budgeted income statement – direct materials budget – production budget – sales budget

-sales budget – production budget – direct materials budget – budgeted income statement

Answer 1

Which of the following is correct about budgetary slack?

Budgetary slack is overstating the expenses and understating the revenue intentionally so that the budget could be easily achieved by the managers.

Thus the third option is correct i.e. it is cushion introduced in the budget so that it is more likely that the budgetary goals are met.

Which of the following is not a benefit of budgeting?

Budgeting helps in accessing performance of managers by comparing the budgeted target and actual achieved. Hence it helps in accessing the performance of managers and rewarding them.

Since buget required to estimate the future revenue and cost, therefore it forces managers to look into the future.

The objective of the budget is not to build slack in the organization. It is introduced by managers so that they could achieve the target easily.

The budget tells about the future plan of the company and hence send uniform communication across the organization.

Hence option third is correct i.e. budget objective is not to build organizational slack.