Deck 9: Budgeting

Question 1

An interrelated set of budgets for a future period is known as:

A)a flexed budget
B)a program budget
C)an assembly of budgets
D)a master budget

Answer 1

D

Question 2

One of the key innovations in future planning has been the introduction of the:

A)balanced scorecard.
B)master budget
C)budget target
D)none of the options is true

Answer 2

A

Question 3

A budget that concentrates on the costs associated with a single program is known as a

A)departmental budget.
B)cash budget.
C)master budget.
D)program budget.

Answer 3

D

Question 4

The key variable which is normally the starting point for the budget process and upon which many other items are based is:

A)working hours of employees.
B)sales.
C)factory capacity.
D)production.

Question 5

The schedule of debtors receipts is prepared to provide information for the:

A)sales budget
B)cash budget
C)production budget
D)budgeted income statement

Question 6

The budget which deals with expenditure relating to long term investments is the:

A)budgeted balance sheet
B)production budget
C)capital budget
D)cash budget

Question 7

Which budget is unlikely to be prepared by the government's Department of Foreign Affairs?

A)sales budget
B)expenses budget
C)cash budget
D)program budget

Question 8

A budget:

A)can sometimes produce negative consequences for the organisation rather than improving efficiency.
B)will always improve the efficiency of an organisation
C)must always be met
D)must be prepared by all entities

Question 9

Which of the following would be included in the operating budgets:

A)the sales or fees budget and the operating expenses budgets
B)the sales or fees budget,the operating expenses budget and the capital expenditure budget
C)the sales budget and the budgeted income statement
D)the sales budget and the cash budget

Question 10

Which of the following organisations would not prepare a capital expenditure budget?

A)a service organisation
B)all the organisations would prepare a capital expenditure budget
C)a retail organisation
D)a manufacturing organisation

Question 11

All of these are ways in which budgeting can provide information for decision-making,except:

A)providing profit forecasts to capital markets.
B)planning labour inputs.
C)predicting when a reversal in the stock market will occur.
D)setting targets for managers.

Question 12

Which of the following statements concerning budgets is not true?

A)Budget targets can sometimes be unreasonable or too difficult to achieve.
B)Budgets should be based on consideration of past performance and assessment of the expected trading and operating conditions.
C)Budgets need to be continually adjusted in the light of subsequent events.
D)Budget targets can never be too high as it is always best to make people try harder to reach a goal.

Question 13

Applicable budgets for a service business such as an fitness centre are unlikely to include:

A)a budgeted income statement.
B)a cash budget.
C)a labour budget.
D)a direct materials budget.

Question 14

The process of strategic planning relates to planning for:

A)the short term (usually less than 1 year)
B)the short term (usually 1 to 3 months)
C)the longer term (often 3 to 5 years)
D)none of the options is correct

Question 15

Which of the following is a way that budgeting and its associated planning can assist in decision making?

A)setting targets for managers
B)identifying resource constraints in the budget period
C)planning labour and other inputs
D)all the options are ways that budgeting and its associated planning can assist in decision making

Question 16

The financial budgets include all of the following,except:

A)budgeted income statement.
B)budgeted balance sheet.
C)capital budget.
D)sales budget.

Question 17

Which of these is a performance management measure?

A)improving customer service
B)increasing sales by 10% pa.
C)cutting costs
D)purchasing a new piece of machinery

Question 18

The master budget is commonly classified into:

A)two sections,the operating budgets and the financial budgets
B)two sections,the sales budget and the operating expenses budget
C)three sections,the sales budget,the operating expenses budget and the cash budget
D)three sections,the budgeted general purpose financial statements,the cash budget and the capital expenditure budget

Question 19

The decision to set up a new branch of the firm in an overseas country is part of:

A)strategic planning.
B)master budgeting.
C)authoritarian budgeting.
D)all of the given options.

Question 20

Which of these is not a commonly prepared budget?

A)cash budget
B)purchases budget
C)depreciation budget
D)capital budget

Question 21

From the following data calculate the estimated cash received from credit sales for October.
Credit sales for August,$10 000;September,$12 000;October,$15 000
Credit sales are normally settled in the pattern,60% in the month of sale and 40% in the month following the sale.

A)$15 000
B)$27 000
C)$9000
D)$13 800

Question 22

To enable the budget to be used as a control tool to monitor the entity's achievements of its plans,the classification of items in the master budget needs to:

A)mirror the organisation's chart of accounts
B)mirror the balanced scorecard
C)mirror the strategic plan
D)all of the options are correct

Question 23

The schedule of cash receipts from debtors provides information to include in:

A)the budgeted income statement.
B)the budgeted balance sheet.
C)the cash budget.
D)the master budget

Question 24

The outlay that appears in the cash budget is:

A)prepaid interest.
B)payment of cash dividends.
C)money borrowed from a moneylender.
D)all the options are included in a cash budget

Question 25

Sales variances are the responsibility of:

A)the board of directors
B)senior management
C)the marketing manager
D)the accountant

Question 26

Rich Company Pty Ltd made these estimates for the three months ending 30 June 2013,its first period of operation.
Estimated:
$\begin{array}{llcc} \text { Cash receipts from sales } &\$300000 \\ \text { Cash payments for expenses } &130000\\ \text { Purchase of fixed asset ( \(\$ 5000\) will not be paid until August)} &20000\\ \text {Depreciation of fixed assets } &15000\\ \text {Repayment of a loan } &100000\\ \text { } &\\\end{array}$

What is the estimated cash balance at 30 June 2013?

A)$40 000 surplus
B)$55 000 surplus
C)$155 000 surplus
D)$55 000 deficit

Question 27

Tan Dan Ltd is planning to purchase a fixed asset costing $150 000 in total.The planned delivery date is 1 December 2013 with settlement on that date.A deposit of $20 000 is to be paid on 1 July 2012.The amount that will appear in the cash budget for December 2013 is:

A)$150 000 outflow
B)$20 000 outflow
C)$130 000 outflow
D)$20 000 inflow

Question 28

The main way in which budgets provide a means of control in an organisation is by:

A)setting budget targets which are attainable.
B)senior managers controlling lower level managers.
C)comparing actual performance with budgeted performance.
D)setting budget targets which will be difficult to attain.

Question 29

Creditors accounts are settled 35% in the month of purchase and 65% in the month following the purchase.If credit purchases are $20 000 in January and $26 000 in February how much cash is paid to creditors in February?

A)$20 000
B)$46 000
C)$26 000
D)$22 100

Question 30

From the following data calculate the estimated cash received from total sales for December.
Total sales for October,$10 000;
November,$15 000;
December,$14 000
Credit sales are normally settled in the pattern,30% for cash,40% in the month of sale,30% in the month following the sale,and the balance in the second month following the sale.

A)$14 000
B)$11 400
C)$13 800
D)$10 500

Question 31

If the production budget shows that 300 bicycles are to be produced for the month,it takes 1.5 labour hours to produce a bike and labour is paid at $187.50 per 7 1/2 hour day,the budget cost of labour for the month is:

A)$22 000
B)$7500
C)$11 250
D)$6600

Question 32

Poor Company Ltd made these estimates for the six months ending 30 September 2013,its first period of operation.
Estimated:

The estimated cash balance at 30 September 2013 is:

A)$5000 deficit
B)$5000 surplus
C)$2500 deficit
D)$2500 surplus

Question 33

If the estimated sales volume for the period is 5000 units,beginning materials inventory is $50 000,the cost of materials per unit is $150 and an ending materials inventory of $55 000 is desired,the budgeted materials cost for the period would be:

A)$755 000
B)$750 000
C)$800 000
D)$850 000

Question 34

If actual sales are $38 000 and budgeted sales are $42 000 and actual rent paid is $7300 and budgeted rent is $8100 the variances are respectively:

A)$4000 F: $800 U
B)$4000 U: $800 F
C)$4000 F: $800 F
D)$4000 U: $800 U

Question 35

Which of the following would not be of assistance in managing an entity's cash flow most efficiently?

A)improving the efficiency collection of cash from debtors
B)reducing unnecessary stock levels
C)making use of creditor terms
D)aiming to repay creditors in the shortest possible time,or ideally purchase everything for cash.

Question 36

If beginning finished goods inventory consists of 2250 units,the expected sales volume for the period is 25 000 units and the desired ending finished goods inventory is 3 000 what is the number of units that will need to be produced for the period?

A)25 000
B)25 500
C)24 250
D)27 250

Question 37

Budget targets should be:

A)set at the highest level of performance.
B)unachievable so that there is always an incentive to do better.
C)set from experience at a reasonable level of performance.
D)set at a low level so they will always be achieved.

Question 38

From the following list of budgets,select the budgets and the correct order in which they would be prepared as part of the development of the operating budget?

A)sales budget,materials budget,production budget
B)production budget,sales budget,materials budget
C)production budget,sales budget,labour budget
D)sales budget,production budget,materials budget

Question 39

Cost of materials required to be purchased equals

A)production in units x materials cost per unit less beginning materials inventory plus target ending materials inventory
B)production in units less materials cost per unit x beginning materials inventory plus target ending materials inventory
C)production in units plus materials cost per unit less beginning materials inventory less target ending materials inventory
D)production in units x materials cost per unit plus beginning materials inventory less target ending materials inventory

Question 40

A cash budget assists decision making by:

A)documenting the timing of all cash receipts and cash payments
B)all the options are ways in which a cash budget assists decision making
C)helping to identify periods of expected cash shortages
D)helping to identify periods of cash surpluses

Question 41

The favourable variance is:

A)budgeted payments for rent $50 000,actual rent $55 000
B)budgeted payment for advertising $18 000,actual advertising $17 500
C)budgeted payment for wages $32 000,actual wages $34 000
D)budgeted payment for interest $500,actual interest $500

Question 42

Budgets are used to operationalise an entity's _______________ plan.

Question 43

The budget which shows the expected future cash receipts and cash payments is the ____________ budget.

Question 44

Performance ____________________ involves setting business targets in other than just financial terms.

Question 45

Which statement is not correct?

A)A favourable variance occurs when actual revenues are greater than budgeted revenues.
B)A favourable variance occurs when actual expenses are less than budgeted expenses.
C)An unfavourable variance occurs when budgeted revenues are less than actual revenues.
D)An unfavourable variance occurs when budgeted expenses are less than actual expenses.

Question 46

Which of the following strategies could be used to improve cash inflow?

A)discount obsolete inventory
B)improve collections of cash from debtors
C)seek ways of increasing sales or fees
D)all the options are strategies which could be used to improve cash inflows

Question 47

Which of these shows an unfavourable variance?

A)budgeted receipts for dividends received $10 000,actual dividends received $10 200
B)budgeted payment for salaries $20 000,actual salaries $19 000
C)actual receipt for sales $120 000,budgeted sales $112 000
D)none of the options result in an unfavourable variance

Question 48

The statement that is incorrect is:

A)With authoritarian style budgeting unit managers have little say in targets
B)The authoritarian style of budgeting is likely to result in 'soft' targets being set to make it easier to meet goals
C)The participative style of budgeting may mean that budget targets are set too low
D)The authoritarian style of budgeting is also known as 'top down' budgeting

Question 49

The term for a set of interrelated budgets is the __________ budget.

Question 50

The sales or fees budget is commonly used to set the expected level of ______________ for the budget period.

Question 51

The _________________ budget which is based on data from the sales budget sets the required level of inventory or direct materials for merchandising or manufacturing entities.

Question 52

Which of the following strategies could be used to reduce cash outflows?

A)cut expenses after identifying areas of duplication
B)limit inventory levels to the minimum level required
C)make use of all creditor terms
D)all the options are strategies which could be used to reduce cash outflows

Question 53

An unfavourable variance occurs when:

A)actual costs are higher than budgeted costs.
B)budgeted costs are lower than actual costs
C)actual sales are lower than budgeted sales
D)all the options are correct

Question 54

The __________ ___ ____________ is a detailed listing of ledger accounts,together with an associated numbering system,that guides how transactions are classified in the financial statements.

Question 55

Which of the following statements regarding the authoritarian style of budgeting is true?

A)Unit managers have little say in the budget targets set.
B)Senior manager set the targets and the budgets for the unit managers.
C)Budgets targets set under the authoritarian style of budgeting may be too high.
D)All the statements are true.

Question 56

Segments of the business,such as departments or branches,for which a manager is given responsibility,are known as ______________ centres.

Question 57

Which of the following statements regarding the budget targets set in a participative style of budgeting is not true?

A)The budget targets are likely be fairer than those set in an authoritarian style.
B)The budget targets are arrived at by a process of discussion and negotiation between unit managers and senior management.
C)The budget targets are more likely to be lower than budget targets set under the authoritarian style.
D)None of the statements is true.

Question 58

Which of these is not a strategy to improve cash inflow?

A)Offer incentives to debtors for prompt payments
B)Sell off unnecessary non-current assets
C)Defer capital expenditure
D)Increase sales

Question 59

A ________________ is the differences between actual and budgeted results.

Question 60

A budget commonly used in the not-for-profit sector and which focuses on costs associated with a specific program is known as a __________ budget.

Question 61

If the actual electricity expense is $43 000 for the period and the budgeted expense is $40 000,there is a _____________ variance of $3000.

Question 62

The budget that is most helpful in identifying and preparing for any liquidity issues is the _____________ budget.

Question 63

In a ________________ style of budgeting the targets and budgets are arrived at by a process of discussion and negotiation between senior managers and unit managers.

Question 64

Under the ___________________ style of budgeting,targets and budgets are set for unit managers by senior management.

Question 65

The control aspect of budgeting is achieved by calculating ______________.