Spot the false budgeting claim

Exercise and reference answers

Questions

1. False statement

   A static budget changes on its own when volume changes.

   Statements

   1. A static budget changes on its own when volume changes.
   2. A static budget is built on one fixed level of activity.
   3. A flexible budget shows budgeted costs at several volumes.

2. False statement

   The cash budget is reported on the budgeted income statement.

   Statements

   1. A master budget combines operating and financial budgets.
   2. The cash budget is reported on the budgeted income statement.
   3. Operating budgets culminate in the budgeted income statement.

3. False statement

   The factory overhead budget needs the production budget result first.

   Statements

   1. The production budget needs the sales budget result first.
   2. The direct labor cost budget needs the production budget result.
   3. The factory overhead budget needs the production budget result first.

4. False statement

   A budget is a report of what already happened last period.

   Statements

   1. A budget is a report of what already happened last period.
   2. The sales budget is prepared before the production budget.
   3. A continuous budget is adjusted each month for the next 12 months.

Instructions

One line in each set is false. Tap it.

Explanation