Deck 9: The Master Budget and Responsibility Accounting

Question 1

The master budget only includes the sales budget,the capital expenditures budget,and the financial budget.

Answer 1

False

Question 2

The master budget is the set of budgeted financial statements and supporting schedules for the entire organization.

Answer 2

True

Question 3

A rolling budget is a budget that

A)is continuously updated,so that the next 12 months of operations are always budgeted.
B)extends 5-10 years into the future.
C)begins with zero for each expense,and then amounts are added in.
D)is rolled out by upper management.

Answer 3

A

Question 4

Strategic planning only involves setting short-term goals that extend a year into the future.

Question 5

The budget committee

A)rarely has the final say on the budget.
B)usually is made up of the accounting staff.
C)usually is made up of the Board of Directors.
D)usually is made up of managers from all areas of the value chain.

Question 6

Budgets provide benchmarks that help managers evaluate performance.

Question 7

Managers may intentionally build slack into the budget

A)because of certainty about the future.
B)to make their performance look worse.
C)to have the resources they need in the event of budget cuts.
D)it makes the overall budget more realistic.

Question 8

Which of the following is a potential disadvantage of participative budgeting?

A)Managers may build slack into the budget.
B)Managers are more likely to be motivated by budgets they helped to create.
C)Managers should have more detailed knowledge for creating realistic budgets.
D)It requires less time than the top down approach.

Question 9

The operating budgets project the collection and payment of cash,as well as forecast the company's budgeted balance sheet.

Question 10

The capital expenditures budget is part of the operating budget.

Question 11

Managers may intentionally build slack into the budget

A)because of uncertainty about the future.
B)to make their performance look better.
C)to have the resources they need in the event of budget cuts.
D)because of all of the above.

Question 12

A zero-based budget is a budget that is continuously updated so that the next 12 months of operations are always budgeted.

Question 13

One of the key benefits of budgeting is that it forces managers to plan.

Question 14

Management uses budgeting to express its plans and to assess how well it's reaching its goals.

Question 15

Strategic planning involves

A)setting short-term goals that extend one year into the future.
B)setting long-term goals that extend 5-10 years into the future.
C)setting goals for next month.
D)executing directives from the board of directors.

Question 16

Budgets are used for all of the following EXCEPT

A)planning for the future.
B)controlling operations.
C)directing operations.
D)recording actual results.

Question 17

The master budget communicates a variable set of plans throughout the company.

Question 18

A budget is a qualitative expression of a plan that helps managers coordinate and implement the plan.

Question 19

Budgeting is helpful to plan for cash inflows and outflows.

Question 20

When developing the budgets each year,most companies use

A)a top-down approach.
B)zero-based budgets.
C)participative budgeting.
D)slack-based budgets.

Question 21

Which of the following budgets is part of the financial budgets?

A)Production budget
B)Budgeted balance sheet
C)Budgeted income statement
D)Sales budget

Question 22

Which of the following is an advantage of the budgeting process?

A)Assures that the lowest cost materials will be obtained
B)Coordinates the activities of the organization
C)Assures the company will achieve its objectives
D)Guarantees that a profit will be achieved

Question 23

Which of the following statements regarding the budgeting process is TRUE?

A)The budget should be designed from the bottom up,with input from employees at all levels.
B)The budget should be approved by the company's external auditors.
C)The budget should always be designed by top corporate management.
D)All of the listed statements are true regarding the budgeting process.

Question 24

Which of the following is a benefit of budgeting?

A)Focuses management's attention on the future
B)Improved decision-making processes
C)Improved motivation by employees
D)All of the above

Question 25

The budget committee does all of the following EXCEPT

A)reviews submitted budgets.
B)removes unwarranted slack.
C)approves the final budget.
D)determines the bonuses awarded to those who achieve budget targets.

Question 26

The ________ budget is a major part of the master budget and results with the income statement and its supporting schedules.

A)operating
B)cash
C)capital expenditures
D)financial

Question 27

Which of the following is the starting place for budgeting?

A)Last year's budget
B)Last year's actual amounts
C)Zero
D)Any of the above

Question 28

Which of the following budgets is part of the financial budgets?

A)Capital expenditure budget
B)Direct labour budget
C)Budgeted income statement
D)Manufacturing overhead budget

Question 29

Which of the following alternatives reflects the proper order of preparing components of the master budget?
1.Production budget
2.Sales budget
3.Direct materials budget

A)2,3,1
B)1,3,2
C)2,1,3
D)3,1,2

Question 30

Which of the following budgets is part of the operating budgets?

A)Production budget
B)Budgeted balance sheet
C)Capital expenditure budget
D)Cash budget

Question 31

Coiffure Inc owns a chain of hair stylist shops.Management expected to serve 20,000 customers at an average fee of $125.Variable expenses were budgeted to be 60% of sales revenue,and the total fixed expense was budgeted to be $150,000.The actual results for the year showed 18,000 customers were served at an average fee of $150.The actual variable expenses percentage was 70% of sales revenue and the total fixed expenses were as budgeted.
Management has asked you to prepare a performance report for the year.

Question 32

Which of the following budgets is part of the financial budgets?

A)Sales budget
B)Cash budget
C)Direct materials budget
D)Operating expense budget

Question 33

Which term below best describes "sets the targeted revenue and expenses for the period"?

A)Operating budget
B)Capital budget
C)Responsibility center
D)Sensitivity analysis

Question 34

List and describe three reasons why a company and its managers could benefit from the use of budgeting.

Question 35

Which of the following alternatives reflects the proper order of preparing components of the master budget?
1.Financial budget
2.Operating budget
3.Capital expenditures budget

A)2,3,1
B)1,3,2
C)1,2,3
D)3,1,2

Question 36

Which term below best describes "the comprehensive budget"?

A)Operating budget
B)Master budget
C)Responsibility center
D)Sensitivity analysis

Question 37

Coiffure Inc owns a chain of hair stylist shops.Management expected to serve 30,000 customers at an average fee of $115.Variable expenses were budgeted to be 60% of sales revenue,and the total fixed expense was budgeted to be $150,000.The actual results for the year showed 28,000 customers were served at an average fee of $125.The actual variable expenses percentage was 50% of sales revenue and the total fixed expenses were as budgeted.
Management has asked you to prepare a performance report for the year.

Question 38

Which of the following statements about budgeting is NOT true?

A)The operating budget should be prepared by top management,rather than mid-management personnel,because they have the overall objectives of the company in mind.
B)Budgeting is an aid to planning and control.
C)Budgets help to coordinate the activities of the entire organization.
D)Budgets promote communication and coordination between departments.

Question 39

The ________ budget is the cornerstone of the master budget.

A)cash
B)sales
C)budgeted balance sheet
D)operating expense

Question 40

Which of the following is an advantage of zero-based budgeting?

A)It is time consuming.
B)It is labour intensive.
C)It forces managers to justify every dollar put in the budget,so some expenses may be lower than they were in previous years.
D)It requires less examination of current expenditures.

Question 41

Desired ending inventory is 25% more than beginning inventory.If purchases total $160,000,which of the following statements is TRUE regarding cost of goods sold (COGS)?

A)COGS will exceed cost of goods available for sale.
B)COGS will exceed purchases.
C)COGS will be less than purchases.
D)COGS will equal $55,000.

Question 42

On the production budget,the number of units to be produced is computed as

A)unit sales + desired end inventory - beginning inventory.
B)unit sales + desired end inventory + beginning inventory.
C)unit sales - desired end inventory - beginning inventory.
D)unit sales - desired end inventory + beginning inventory.

Question 43

Biker Billy is a motorcycle dealership.Management expected to sell 1,000 bikes at an average sale price of $30,000.Variable expenses were budgeted to be 80% of sales revenue,and the total fixed expense was budgeted to be $2,500,000.The actual results for the year showed 800 bikes sold at an average price of $32,000.The actual variable expenses percentage was 75% of sales revenue and the total fixed expenses were $2,500,000.
Management has asked you to prepare a performance report for the year.

Question 44

Budgeting includes planning for ending inventory.

Question 45

Desired ending inventory is 80% of beginning inventory.If cost of goods sold is $300,000,which of the following statements is TRUE regarding purchases?

A)Purchases will be more than cost of goods sold.
B)Purchases will be 80% of cost of goods sold.
C)Purchases will equal cost of goods sold.
D)Purchases will be less than cost of goods sold.

Question 46

The first component of the operating budget is the sales budget.

Question 47

Biker Billy is a motorcycle dealership.Management expected to sell 800 bikes at an average sale price of $15,000.Variable expenses were budgeted to be 80% of sales revenue,and the total fixed expense was budgeted to be $2,000,000.The actual results for the year showed 1,000 bikes sold at an average price of $14,000.The actual variable expenses percentage was 85% of sales revenue and the total fixed expenses were $2,100,000.
Management has asked you to prepare a performance report for the year.

Question 48

A plan that shows the units to be sold and the projected selling price and is also the starting point in the budgeting process,is called the

A)cash budget.
B)budgeted statement of cash flows.
C)sales budget.
D)budgeted income statement.

Question 49

Coiffure Inc owns a chain of hair stylist shops.Management expected to serve 20,000 customers at an average fee of $200.Variable expenses were budgeted to be 60% of sales revenue,and the total fixed expense was budgeted to be $150,000.The actual results for the year showed 30,000 customers were served at an average fee of $150.The actual variable expenses percentage was 65% of sales revenue and the total fixed expenses were $180,000.
Management has asked you to prepare a performance report for the year.

Question 50

Biker Billy is a motorcycle dealership.Management expected to sell 800 bikes at an average sale price of $30,000.Variable expenses were budgeted to be 75% of sales revenue,and the total fixed expense was budgeted to be $2,500,000.The actual results for the year showed 1,000 bikes sold at an average price of $26,000.The actual variable expenses percentage was 80% of sales revenue and the total fixed expenses were $2,500,000.
Management has asked you to prepare a performance report for the year.

Question 51

The operating expense budget is the starting point of the master budget.

Question 52

Which of the following budgets or financial statements is part of the operating budget?

A)Capital expenditures budget
B)Budgeted balance sheet
C)Sales budget
D)Cash budget

Question 53

The sales budget must be prepared before any other component of the operating budget.

Question 54

Coiffure Inc owns a chain of hair stylist shops.Management expected to serve 25,000 customers at an average fee of $200.Variable expenses were budgeted to be 60% of sales revenue,and the total fixed expense was budgeted to be $150,000.The actual results for the year showed 28,000 customers were served at an average fee of $165.The actual variable expenses percentage was 60% of sales revenue and the total fixed expenses were $180,000.
Management has asked you to prepare a performance report for the year.

Question 55

Which of the following budgets begins with the number of units to be sold?

A)Manufacturing overhead budget
B)Production budget
C)Direct materials budget
D)Capital expenditures budget

Question 56

The three components of the operating budget are the sales budget;inventory,purchases and cost of goods sold budget;and the cash budget.

Question 57

Which of the following budgets is the only one stated only in units,not dollars?

A)Sales budget
B)Production budget
C)Direct materials budget
D)Manufacturing overhead budget

Question 58

On the direct materials budget,the total quantity of direct materials needed is computed as

A)units to be produced + desired end inventory of DM - beginning inventory of DM.
B)quantity needed for production + desired end inventory of DM - beginning inventory of DM.
C)units to be produced - desired end inventory of DM +beginning inventory of DM.
D)quantity needed for production - desired end inventory of DM + beginning inventory DM.

Question 59

Biker Billy is a motorcycle dealership.Management expected to sell 800 bikes at an average sale price of $20,000.Variable expenses were budgeted to be 85% of sales revenue,and the total fixed expense was budgeted to be $2,500,000.The actual results for the year showed 1,000 bikes sold at an average price of $16,000.The actual variable expenses percentage was 80% of sales revenue and the total fixed expenses were $2,750,000.
Management has asked you to prepare a performance report for the year.

Question 60

Which of the following budgets usually shows separate sections for fixed and variable costs?

A)Operating expense budget and manufacturing overhead budget
B)Manufacturing overhead budget and production budget
C)Production budget and manufacturing overhead budget
D)Direct materials and manufacturing overhead budget

Question 61

Bright Lights Company produces and sells a lantern for $20 each.The beginning inventory is 2,000 lanterns,and the desired ending inventory is 2,200 lanterns.If budgeted production is 12,500 lanterns,what is the forecasted sales revenue from the lanterns?

A)$166,000
B)$334,000
C)$254,000
D)$246,000

Question 62

What is the desired ending inventory on May 31 at Peabody Enterprises?

A)$8,400
B)$1,120
C)$1,680
D)$1,440

Question 63

What is the budgeted cost of goods sold for May at Peabody Enterprises?

A)$3,600
B)$7,200
C)$2,400
D)$4,800

Question 64

What is the desired beginning inventory on June 1 at Peabody Enterprises?

A)$1,120
B)$1,680
C)$1,440
D)$8,400

Question 65

Clark Company has beginning inventory of 16,000 units and expected sales of 23,000 units.If the desired ending inventory is 18,000 units,how many units should be produced?

A)25,000
B)21,500
C)11,000
D)57,000

Question 66

Horvath Corporation had beginning inventory of 22,000 units and expects sales of 76,500 units during the year.Desired ending inventory is 19,500 units.How many units should Horvath Corporation produce?

A)74,000 units
B)79,000 units
C)35,000 units
D)118,000 units

Question 67

Stiller Company expects cash sales for July of $15,000,and a 20% monthly increase during August and September.Credit sales of $10,000 in July should be followed by 25% increases during August and September.What are budgeted cash sales and budgeted credit sales for September respectively?

A)$18,000 and $12,500
B)$21,600 and $15,625
C)$23,438 and $14,400
D)$18,750 and $12,000

Question 68

A tire store purchased $3,800 of tires in September.The store had $1,500 of tires on hand at the beginning of September,and expected to have $1,300 of tires at the end of September to cover part of anticipated October sales.What is the budgeted cost of goods sold for September?

A)$4,000
B)$3,600
C)$6,600
D)$5,300

Question 69

Lawrence Corporation desires a December 31 ending inventory of 900 units.Budgeted sales for December are 2,650 units.The November 30 inventory was 750 units.What are budgeted purchases in units?

A)3,550
B)2,800
C)2,500
D)4,300

Question 70

Beedie Company has two products: Beedlez and Bugz.A March sales forecast projects 20,000 units of Beedlez and 15,000 units of Bugz are going to be sold at prices of $10 and $12,respectively.The desired ending inventory of Beedlez is 20% higher than the beginning inventory,which was 2,000 units.How much are total March sales for Beedlez anticipated to be?

A)$200,000
B)$180,000
C)$100,000
D)$240,000

Question 71

Benson Stores wants to have 500 flashlights in ending inventory on December 31.Budgeted sales for December are 1,950 flashlights.The November 30 inventory was 300 flashlights.How many flashlights should Benson Stores purchase for December?

A)2,450
B)1,750
C)2,150
D)2,750

Question 72

Rong Company expects cash sales for July of $15,000,and a 20% monthly increase during August and September.Credit sales of $6,000 in July should be followed by 10% decreases during August and September.What are budgeted cash sales and budgeted credit sales for September?

A)$12,150 and $8,640
B)$18,000 and $5,400
C)$21,600 and $4,860
D)$13,500 and $7,200

Question 73

What are the total purchases budgeted for May at Peabody Enterprises?

A)$6,960
B)$7,440
C)$8,640
D)$7,680

Question 74

Stuart Corporation recorded sales of $200,000 during March.Management expects sales to increase 5% in April,another 4% in May,and another 10% in June.Cost of goods sold is expected to be 80% of sales.What is the budgeted gross profit for June?

A)$45,427
B)$48,048
C)$240,240
D)$43,680

Question 75

Kayla's Toys budgeted sales of $300,000 for the month of November and cost of goods sold equal to 70% of sales.Beginning inventory for November was $50,000 and ending inventory for November is estimated at $55,000.How much are the budgeted purchases for November?

A)$205,000
B)$95,000
C)$215,000
D)$105,000

Question 76

What are the total purchases budgeted for April at Peabody Enterprises?

A)$7,680
B)$7,440
C)$9,360
D)$7,920

Question 77

Lacy's Department Store has budgeted cost of goods sold of $42,000 for its men's suits in March.Management also wants to have $7,500 of men's suits in inventory at the end of March to prepare for the summer season.Beginning inventory of men's suits for March is expected to be $5,500.What dollar amount of men's suits should be purchased in March?

A)$44,000
B)$40,000
C)$55,000
D)$29,000

Question 78

Good Doggie Treatz Company expects to sell 5,000 gourmet dog biscuits in January and 9,000 in February for $2 each.What will be the total sales revenue reflected in the sales budget for those months?

A)January $2,500;February $4,500
B)January $18,000;February $10,000
C)January $4,500;February $2,500
D)January $10,000;February $18,000

Question 79

MedSupplies Company has budgeted purchases of inventory for December of $140,000.Expected beginning inventory on December 1 and ending inventory on December 31 are $90,000 and $120,000,respectively.If cost of goods sold averages 80% of sales,what are budgeted sales for December?

A)$212,500
B)$88,000
C)$137,500
D)$437,500

Question 80

Artwell Company wants to have an ending inventory of 7,000 units.Artwell Company has beginning inventory of 8,000 units and expects to sell 33,000 units.How many units should Artwell Company produce?

A)48,000
B)40,000
C)34,000
D)32,000