6) A company’s actual performance should be compared against budgeted amounts for the same accounting period so that ________.
A) adjustments for future conditions can be included
B) to avoid any feedback from the budgets due to past miscues
C) inefficiencies of the past year can be included
D) a rolling budget can be implemented
7) Which of the following is a reason why top managers want lower-level managers to participate in the budgeting process?
A) To benefit from their experience with the day-to-day aspects of running the business.
B) To reduce the time and cost expended in the budgeting process.
C) To ensure that they do not introduce any budgetary slack.
D) To ensure that the budgets are administered rigidly given the changing market conditions.
8) Demanding but achievable targets tend to ________.
A) be set by subordinate managers to create intrinsic reasons to achieve targets
B) create unnecessary anxiety that de-motivates employees
C) improve performance of employees when they are closer to the target
D) be perceived as ambitious with little chance of success in achieving targets
9) Which of the following is referred to as the bottom-up aspect of the budgeting process?
A) lower-level managers setting their individual targets that aggregate to be the company-wide target
B) senior managers consulting middle- and lower-level managers to investigate any deviations from the budget
C) lower-level managers implementing the budgets with senior managers monitoring progress and investigating deviations
D) lower-level managers providing inputs to the budgeting process based on their specialized knowledge
10) Participation of employees in the budgeting process helps ________.
A) create greater commitment towards the budget
B) create demanding but achievable budget
C) decrease deviations from the budget
D) secure communication of sensitive information
11) Managers who feel that top management does not believe in the budget are most likely to ________.
A) pick up the slack and participate in the budgeting process
B) to face little interference in the day-to-day aspects of running the business
C) be inactive participants in the budgeting process
D) convert the budget to a shorter more reasonable time period
12) Which of the following is a benefit of budgeting?
A) It helps investors to value stocks.
B) It helps managers gather information for improving future performance.
C) It helps managers to take marketing decisions.
D) It helps in increasing market capitalization of the company.
13) Rolling budgets help management to ________.
A) better review the past calendar year
B) deal with a 5-year time frame
C) focus on the upcoming budget period
D) rigidly administer the budget
14) Budgets should ________.
A) be flexible
B) be administered rigidly
C) only be developed for short periods of time
D) include only variable costs
15) After a budget is agreed upon and finalized by the management team, the amounts should NOT be changed for any reason.
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