Question 1

Management must get employees to accept the budget's goals in order to effectively use the budget as a benchmark for evaluating performance.

Accepted Answer

A) True 
 B)False  True

Question 2

A goal of the budgeting process is to assist managers with coordinating and implementing the business plan.

Accepted Answer

A) True 
 B)False  True

Question 3

At a company with different business units, individual managers can modify various assumptions of their budget in order to determine how the modifications would affect the operational and financial results. This is an example of:

Accepted Answer

A)  financial statement analysis.
B)  sensitivity analysis.
C)  responsibility accounting.
D)  zero- based budgeting. B

Question 4

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts payable, which document should be used?

Accepted Answer

A)  Electricity and gas budget
B)  Cash budget
C)  Budgeted cash payments for purchases
D)  Inventory, purchases and cost of sales budget

Question 5

Repair and maintenance costs for factory equipment are included in manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 6

Liu Electronics budgeted sales of $400 000 for the month of November; cost of sales is equal to 65% of sales. Beginning inventory for November was $80 000 and ending inventory for November should be $72 000. How much are the budgeted purchases for November?

Accepted Answer

A)  $264 800
B)  $252 000
C)  $254 800
D)  $265 200

Question 7

Caskill Company forecasts $40 000 of sales in January, $38 000 in February, $30 000 in March, and $32 000 in April. Cost of sales is budgeted at 75% of sales. Caskill should have inventory on hand at the end of each month equal to $5 000 plus 20% of the following month's cost of sales. How much are budgeted purchases for January?

Accepted Answer

A)  $27 300
B)  $22 800
C)  $24 900
D)  $29 700

Question 8

Advertising and marketing costs are inventoriable product costs.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following describes the operating expenses budget?

Accepted Answer

A)  It aids in planning to ensure the company has adequate inventory on hand.
B)  It depicts the breakdown of sales based on terms of collection.
C)  It helps in planning to ensure the business has adequate cash.
D)  It captures the variable and fixed expenses of the business.

Question 10

A goal of the budgeting process is to promote coordination and communication throughout.

Accepted Answer

A) True 
 B)False

Question 11

Bartholomew Manufacturing Company is preparing the operating budget for the first quarter of 2013. They forecast sales of $50 000 in January, $60 000 in February, and $70 000 in March. Cost of sales is budgeted at 40% of Sales. Variable and fixed expenses are as follows: Variable: Miscellaneous expenses : 20% of Sales Fixed: Salary expense: $11 000 per month
Rent expense: $5 000 per month
Depreciation expense: $1 200 per month
Miscellaneous expenses/fixed portion: $3 300 per month
How much is the operating net profit/(loss)for January?

Accepted Answer

A)  $3 500
B)  ($500) 
C)  $1 450
D)  $7 500

Question 12

Inventoriable product costs, such as direct materials, are expensed during the period that they were incurred.

Accepted Answer

A) True 
 B)False

Question 13

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts receivable, which document should be used?

Accepted Answer

A)  Electricity and gas budget
B)  Sales budget plus budgeted cash collections
C)  Cash budget
D)  Inventory, purchases and cost of sales budget

Question 14

Accounting, legal and administrative costs are included in manufacturing overhead.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following applies to the raw materials used by a manufacturing company?

Accepted Answer

A)  Finished goods inventory
B)  Materials inventory
C)  Inventory
D)  Work in process inventory

Question 16

For a manufacturing business, which of the following would be included in manufacturing overhead?

Accepted Answer

A)  Fuel and maintenance for delivery vehicles
B)  Sales commissions
C)  Wages of the factory manager
D)  Wages of the assembly line workers

Question 17

The capital expenditures budget stands alone and is not part of either the operating budget or the financial budget.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is an example of the planning function of a budget?

Accepted Answer

A)  A budget demands integrated input from different business units and functions.
B)  Employees are motivated to achieve the goals set by the budget.
C)  The budget outlines a specific course of action for the coming period.
D)  Budget figures are used to evaluate the performance of managers.

Question 19

Argyle Company forecasts sales of $50 000 in January, $60 000 in February, $70 000 in March, and $75 000 in April. The inventory balance at 1 January is $12 000. Cost of sales is budgeted at 40% of sales revenue. Argyle wishes to have inventory levels at the end of each month equal to 60% of the cost of sales for the following month, plus a "safety cushion" of $1 000. How much should be budgeted for inventory purchases in January?

Accepted Answer

A)  $23 400
B)  $26 400
C)  $22 100
D)  $21 000

Question 20

Bartholomew Manufacturing Company is preparing the operating budget for the first quarter of 2013. They forecast sales of $50 000 in January, $60 000 in February, and $70 000 in March. Cost of sales is budgeted at 40% of Sales. Variable and fixed expenses are as follows: Variable: Miscellaneous expenses : 20% of Sales Fixed: Salary expense: $11 000 per month
Rent expense: $5 000 per month
Depreciation expense: $1 200 per month
Miscellaneous expenses/fixed portion: $3 300 per month
How much is the operating net profit/(loss)for February?

Accepted Answer

A)  $1 450
B)  $7 500
C)  ($500) 
D)  $3 500

Exam 19: Introduction to Managerial Accounting and the Master Budget

Management must get employees to accept the budget's goals in order to effectively use the budget as a benchmark for evaluating performance.

A goal of the budgeting process is to assist managers with coordinating and implementing the business plan.

At a company with different business units, individual managers can modify various assumptions of their budget in order to determine how the modifications would affect the operational and financial results. This is an example of:

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts payable, which document should be used?

Repair and maintenance costs for factory equipment are included in manufacturing overhead.

Liu Electronics budgeted sales of $400 000 for the month of November; cost of sales is equal to 65% of sales. Beginning inventory for November was $80 000 and ending inventory for November should be $72 000. How much are the budgeted purchases for November?

Advertising and marketing costs are inventoriable product costs.

Which of the following describes the operating expenses budget?

A goal of the budgeting process is to promote coordination and communication throughout.

Inventoriable product costs, such as direct materials, are expensed during the period that they were incurred.

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts receivable, which document should be used?

Accounting, legal and administrative costs are included in manufacturing overhead.

Which of the following applies to the raw materials used by a manufacturing company?

For a manufacturing business, which of the following would be included in manufacturing overhead?

The capital expenditures budget stands alone and is not part of either the operating budget or the financial budget.

Which of the following is an example of the planning function of a budget?