Manage Budgets, Project Costs and Financial Plans
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Manage Budgets, Project Costs, and Financial Plan
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Manage Budgets, Project Costs and Financial Plans
1. Which of the following cost estimating techniques requires the most time to perform?
1 . Analogous estimating
2 . Bottom-up estimating
3 . Parametric estimating
4 . All of the above
2. An estimate cost should always include:
1 . Unknown unknowns
2 . Value engineering
3 . Analogous estimating
4 . Indication of accuracy
3. The process of aggregating the estimated costs of individual activities or work packages to
establish an authorised cost baseline is called:
1 . Determine cash flow
2 . Estimate cost
3 . Determine budget
4 . Value engineering
4. ROM stands for:
1 . Reality of measure
2 . Rough order of magnitude
3 . Ready order of measure
4 . Rough operational measure
5. The reserve is:
1 . An important calculation in the estimating costs process.
2 . A provision in the budget to mitigate cost and/or risk.
3 . An amount of money set aside for project running overtime.
4 . All of the above.
6. Cost estimating is linked very closely with:
1 . Scope
2 . Schedule
3 . Resource planning
4 . All the above
7. When establishing cost control a typical measuring point is:
1 . The project Gantt chart
2 . The project schedule
3 . The project milestones
4 . The project charter
8. The cost management plan outlines how to:
1 . Control project costs
2 . Structure and control project costs
3 . Structure project costs
4 . Manage the project budget
9. A rough order of magnitude estimate has an expected accuracy in the range of:
1 . None of the above
2 . -25% to +75%
3 . -10% to +25%
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4 . -5% to +10%
5 . All of the above
10. Project cost control includes:
1 . Monitoring cost performance
2 . Ensuring that only appropriate and approved changes are made to the project budget
3 . Informing stakeholders of authorised changes to project cost
4 . All of the above
5 . None of the above
11. Operating budgets are:
1 . A forecast of expected operating expenses.
2 . A forecast of operating expenses.
3 . A forecast of units of production.
4 . Concerned with the income-generating activities of a firm.
5 . Concerned with the inflows and outflows of cash.
12. Which of the following is not an advantage of budgeting?
1 . It forces managers to plan.
2 . It provides resource information that can be used to improve decision making.
3 . It aids in the use of resources and employees by set ting a benchmark that can be used for the subsequent evaluation
of performance.
4 . It provides organisational independence.
5 . It improves communication and coordination.
13. Which of the following is true about a hierarchy of goals?
1 . They should be set by corporate-level managers
2 . Goals at the functional level should be the same as at the corporate level
3 . Sub-goals are set in harmony with goals at upper levels
4 . All of the above are true
14. The planning phase culminates in a broad operating plan that includes:
1 . A statement of goals
2 . A statement of sub-goals
3 . A statement of broad performance objectives
4 . All of the above
15. Owners’ equity is:
1 . What the business is worth
2 . An internal liability
3 . What the business owes to the owner
4 . All of the above
16. Current assets comprise:
1 . The cash the business holds in a bank over the life of the business
2 . Cash and other assets that will be used, consumed or converted into cash within the next 12 months
3 . Cash and other assets that will be used, consumed or converted into cash over the life of the business
4 . All inventory or stock on hand and carried over from year to year
17. Morgan Company produces and sells laptop computers. It had 2,000 computers in finished goods inventory at the end of the last
year. The company expects to sell 20,000 computers and would like to complete oper ations in this year with at least 2,500 completed
computers in inventory. There is no ending work-in-process inventory in either year. The laptop computers sell for $2,000 each. How
many laptop computers would be produced for the next year?
1 . 20,000
2 . 20,500
3 . 22,000
4 . 22,500
5 . 24,500
18. Reid Company is budgeting production of 100,000 units of product R for the month of September this year. Production of one
unit of product R requires three units of material B. For material B, the actual inventory units at September 1 were 22,000 units and
budgeted inventory units at September 30 are 24,000. How many units of material B is Reid planning to purchase during September?
1 . 328,000
2 . 302,000
3 . 298,000
4 . 272,000
5 . 250,000
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19. Which of the following factors is not a responsibility of the budget commit tee?
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1 . Reviews the budget.
2 . Provides policy guidelines.
3 . Provides budgeting goals.
4 . Resolves differences that may arise as the budget is prepared.
5 . Prepares actual financial statements.
20. XYZ has forecast sales for the next three months as follows: January, 10,000 units; February, 15,000 units; and March, 20,000 units. Inventory as of January 1 is expected to be 2,000 units. Ending inventories should equal 25% of the coming month’s sales
needs. How many units should be produced in February?
1 . 13,750 units
2 . 15,000 units
3 . 16,250 units
4 . 18,000 units
5 . none of the above
21. Scooter Corp. has forecast sales as follows: July, 30,000 units; August, 35,000 units; and September, 40,000 units. Finished goods
inventory as of July 1 is forecast to be 10,000 units. Finished goods inventory of 20% of the following month’s sales needs is desired.
Each finished unit requires 5 pounds of raw material. The raw materials inventory level on July 1 was 202,500 pounds and the
expected raw materials inventory level on July 31 will be 270,000 pounds. How many pounds of r aw material should be purchased in
July?
1 . 27,000 pounds
2 . 40,500 pounds
3 . 135,000 pounds
4 . 202,500 pounds
5 . None of the above
22. Acme Company has observed its accounts receivable collection pat tern to be as follows: 40% in the month of the sale, 45% in the
month following the sale, and 13% in the second month following the sale. Sales for the last three months of the year were as
follows: October, $300,000; November, $450,000; and December, $625,000. Sales for January are budgeted to be $375,000. What are
the budgeted cash collections for January?
1 . $375,000
2 . $489,750
3 . $495,750
4 . $625,000
5 . none of the above
23. Which of the following items would have to be included for a company preparing a schedule of cash receipts and disbursements
for the calendar year 2013?
1 . The annual depreciation for 2013
2 . A purchase order issued in December 2013 for items to be delivered in February 2014
3 . Dividends declared in November 2013, to be paid in January 2014 to shareholders of record as of December 2013
4 . The amount of uncollectible customer accounts for 2013
5 . Funds borrowed from a bank on a note payable taken out in June 2012 with an agreement to pay the principal and all
of the interest owed in December 2013
24. Individual budget schedules are prepared to develop an annual comprehensive or master budget. The budget schedule that
would provide the necessary input data for the direct labor budget would be the:
1 . Sales forecast
2 . Raw materials purchases budget
3 . Schedule of cash receipts and disbursements
4 . Schedule of manufacturing overhead
5 . Production budget
25. In a not-for-profit service firm, the sales budget is replaced by:
1 . The production budget
2 . The finished goods budget
3 . A budget that identifies the various services and the associated funds assigned to them
4 . A budget that identifies the various expenses
5 . None of the above
26. Which of the following budgets would not be present for both for-profit and not-for-profit service or ganisations?
1 . Sales budget
2 . Budgeted income statement
3 . Budgeted balance sheet
4 . Finished goods budget
5 . Cash budget
27. In a for-profit service firm, the sales budget is also the:
1 . Merchandise purchase budget
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2 . Production budget
3 . Direct materials budget
4 . Overhead budget
5 . None of the above
28. Profit and loss budgets include:
1 . Revenue
2 . Costs
3 . Revenue and expenses
4 . Capital expenses
29. Capital budgets are:
1 . Prepared for acquisition of capital items
2 . Prepared for operational activities
3 . Prepared for production activities
4 . Only prepared by top-level management
30. The strategic plan of an organisation:
1 . Provides planning direction for tactical level managers
2 . Sets the direction (vision) for an organisation
3 . Is the basis for organisational budgeting
4 . All of the above
31. Involvement in the budgeting process should:
1 . Be restricted to higher-level management
2 . Include operational people after the process is completed
3 . Never include people who are below tactical-level management
4 . Include management and the people who are responsible for achieving budgets
32. The balance sheet:
1 . Measures the financial performance of an organisation
2 . States the financial position of an organisation
3 . Shows the cash flow in an organisation
4 . Only shows the assets of the organisation
33. The profit and loss statement:
1 . Measures the financial performance of an organisation
2 . States the financial position of an organisation
3 . Shows the cash flow in an organisation
4 . Only shows the revenue of the organisation
34. Gross profit is calculated as:
1 . Sales revenue less all costs
2 . Sales revenue less operational expenses
3 . Sales revenue less net profit
4 . Sales revenue less cost of goods sold only
35. The time frame for strategic objectives is generally:
1 . 3 – 5 years
2 . 1 year
3 . 1 – 5 years
4 . Over 10 years
36. The sales budget for 2017 estimated that sales would increase by 10% on 2016 actual sales. If actual sales in 2016 was 300,000
units the sales budget for 2017 is:
1 . 270,000
2 . 330,000
3 . 300,010
4 . 300,000
37. The sales budget for 2017 estimated that sales would be 200,000 units. The sale price per unit is $2.50. Actual results for the
same period were $495,000. The variance is:
1 . $5,000 Favourable
2 . $5,000 Unfavourable
3 . $500,000 Favourable
4 . $495,000 Unfavourable
38. The budget management process should include contingency plans because:
Manage Budgets, Project Costs, and Financial Plan
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1 . All budgets will not be achieved
2 . There are internal and external factors that can affect the success of budgets
3 . We should always spend under what we expect
4 . It ’s not required because contingency plans don’t allow for mistakes
39. The budget management process involves the use of the following resources:
1 . Financial resources only which is used once the budget is implemented
2 . Human resources for the preparation and implementation of budgets, financial resources for the production and
implementation, and physical resources to ensure we have the time and place to complete the tasks
3 . No resources are required to prepare budgets – they are prepared miraculously
4 . Resources require money and it ’s not in the budget!
40. The budget management process should include a communication plan:
1 . That outlines the funding available to each department
2 . That customises the information based on audience and relevance
3 . That is sent out as a media release in a national paper
4 . That only communicates to upper management and not everyone involved in the budget process
41. Training staff involved in the budget management process:
1 . Is essential as it will enable all employees involved in preparing and implementing the budget to perform their role to
ensure they meet budget outcomes
2 . Enables management to delegate their tasks
3 . Involves external training and would not involve mentoring or coaching as this will cost the organisation money
4 . Is not essential as staff were hired to know how to perform this role
42. Which of the following statements is false?
1 . The master budget is a flexible budget for the denominator activity level
2 . The technique of flexible budgeting is used to fine tune the master budget for performance evaluation purposes, i.e.,
to prepare budgets which are comparable with the actual results
3 . The master budget includes appropriation budgets
4 . Appropriation budgets are used to set the maximum amounts for many types of discretionary expenditures
43. If a decrease in the time lag between ordering and receiving direct materials could be obtained by switching to a new vendor,
then the average inventory of direct material could be decreased. This would most likely,
1 . Increase net income in the current month
2 . Decrease cash outflows in the current month
3 . Increase net income in future months as well as decrease cash outflows in the current and future periods
4 . All of these
5 . None of these
44. Which of the following is a purpose or advantage of the master budget process?
1 . Coordination of the activities of the different functional areas of the firm
2 . Communication to managers of how their efforts add value to the organisation’s products or services
3 . Forces management to establish profit objectives
4 . Provides a tool for evaluation and control
5 . All of these
45. Which of the following statements is true? The master budget process for a manufacturing firm…
1 . May be referred to as either incremental budgeting or zero base budgeting
2 . May include appropriation budgets
3 . May include continuous budgets
4 . 2 and 3
5 . All of the above
46. Appropriation budgets are:
1 . Flexible Budgets
2 . Static (Fixed) Budgets
3 . Incremental Budgets
4 . Zero Base Budgets
5 . None of these
47. The two main parts of a master budget are:
1 . The operating budget and the financial budget
2 . The production budget and the selling and administrative budget
3 . The income statement and the cash budget
4 . The sales budget and the income statement
5 . None of these
48. Research and development costs fall into which of the cost categories listed below?
1 . Engineered costs
2 . Discretionary costs
3 . Committed costs
4 . Product costs
5 . Variable costs
49. Conceptually, zero-based budgeting means that the manager must:
1 . Justify 100% of his or her budget
2 . Justify 80% of his or her budget
3 . Justify 50% of his or her budget
4 . Justify 20% of his or her budget
5 . Justify 10% of his or her budget
50. The two overall purposes of the master budget are:
1 . Planning and coordinating
2 . Motivating and controlling
3 . Integrating and communicating
4 . Planning and controlling
5 . Product costing and pricing
51. A type of budgeting that has been recommended to reduce behavioural conflicts is the:
1 . Rolling budget
2 . Priority budget
3 . Optimistic or reach budget
4 . Flexible budget
5 . Participative budget
52. The two main parts of a master budget include:
1 . The sales budget and the cash budget
2 . The income statement and the balance sheet
3 . The operating budget and the financial budget
4 . The production budget and selling and administrative budget
5 . None of these
53. Employee training costs fall into which of the cost categories listed below?
1 . Engineered costs
2 . Committed costs
3 . Discretionary costs
4 . Product costs
5 . Variable costs
54. Critics of accounting and budgeting mainly criticise which of the following budgeting purposes?
1 . Planning
2 . Controlling
3 . Coordinating
4 . Communicating
5 . Integrating
55. Which of the following is not a benefit of budgeting?
1 . Management can plan ahead
2 . An early warning system is provided for potential problems
3 . It enables disciplinary action to be taken at every level of responsibility
4 . The coordination of activities is facilitated
56. The journal entry is:
1 . An easy way to visualise business transactions
2 . Just like a logbook that contains a chronological listing of a company ’s transactions and events
3 . A way to document business activity as it occurs
4 . All of the above
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57. A source document for recordable transactions is usually in the form of:
1 . An invoice
2 . A timesheet
3 . A tax statement
4 . A bank deposit slip
5 . 1 and 3 only
6 . All of the above
58. Each of the following budgets is used in preparing the budgeted income statement except the:
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1 . Sales budget
2 . Selling and administrative budget
3 . Capital expenditure budget
4 . Direct labor budget
59. Is it better to begin cost negotiations with project stakeholders before conducting a cost estimate.
1 . True
2 . False
60. In the 21st century world of work, all project team members need to have an understanding of the project costs.
1 . True
2 . False
61. It is impossible to obtain accurate project estimates as there are just too many variables.
1 . True
2 . False
62. The cost performance baseline can only be changed by going through a formal change management process
1 . True
2 . False
63. Controlling cost is the process of monitoring the status of the project to update the project budget and manage changes to the
project baseline.
1 . True
2 . False
64. Expert opinion is a useful tool for cost estimating
1 . True
2 . False
65. Baselining the project is the process of determining the middle point through the budget estimates.
1 . True
2 . False
66. Cost reporting is not the same as cost controlling.
1 . True
2 . False
67. Always compare what you have spent with what you should have spent against what you have achieved.
1 . True
2 . False
68. When monitoring budgets, it is usually sufficient to compare actual costs against budgeted costs.
1 . True
2 . False
69. Budgets are never completely accurate.
1 . True
2 . False
70. Project managers need to have a good working knowledge of financial and basic accounting principles.
1 . True
2 . False
71. The cost management process involves the project manager and project team with the project sponsor only.
1 . True
2 . False
72. In order to calculate accurate estimates you need the WBS and specifically the activity packages.
1 . True
2 . False
73. The basic purpose of the AASB standards is to ensure that there is comparability of the financial reports of Australian businesses
or entities within a prescribed format.
1 . True
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2 . False
74. Accounting is a relatively new practice that has recently evolved in the 20th century
1 . True
2 . False
75. A liability is what the business owes outside or external to the business.
1 . True
2 . False
76. A long-term approach to strategic planning fails to deliver prudent financial management within an organisation.
1 . True
2 . False
77. It is absolutely essential that all organisations develop a reliable accounting system to capture, manipulate and summarise its
transaction data.
1 . True
2 . False
78. A debit is an accounting entry that either increases a liability or equity account, or decreases an asset or expense account.
1 . True
2 . False
79. The records that are kept for the individual asset, liability, equity, revenue, expense, and dividend components are known as
accounts.
1 . True
2 . False
80. A credit is an accounting entry that either increases an asset or expense account, or decreases a liability or equity account.
1 . True
2 . False
81. Under the double-entry system every business transaction is recorded in at least two accounts.
1 . True
2 . False
82. A budget is a comprehensive financial plan setting forth the expected route for achieving the financial and oper ational goals of an
organisation.
1 . True
2 . False
83. One of the benefits derived from budgeting is the assignment of decision-making responsibilities.
1 . True
2 . False
84. Most operating and capital expenditure budgets cover a period of one fiscal year.
1 . True
2 . False
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