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budgeting & Activity Based budgeting

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1. Which of the following is a TRUE statement?
The direct materials purchases budget is determined from the direct labor budget.
The selling and administrative expense budget is input into the forecasted cost of goods sold.
The direct materials purchases budget and the capital expenditures budget are both determined from the production budget.
The direct materials purchases budget is prepared after the production budget is completed.

2. Which of the following statements is true about ABB (activity-based budgeting)?
ABB is an alternative costing method allowable by GAAP.
ABB is a good match to GAAP financial statement since ABB focuses on cost functions.
ABB focuses on outputs expected in order to evaluate how many resources are needed to perform the activities necessary to produce them.
When using ABB, total manufacturing costs will be different than when using traditional costing.

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The direct materials purchases budget is determined from the direct labor budget.
No: determined from production budget

The selling and administrative expense budget is input into the forecasted cost of goods sold.
No: S&A is not a product cost

The direct materials purchases budget and the capital ...

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Carol Sargent, PhD
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  • BSc, University of Virginia
  • MSc, University of Virginia
  • PhD, Georgia State University
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