Question 1

Which of the following statements about budgeting is false?

Accepted Answer

A) Budgeting is an aid to planning and control. 
B) Budgets create standards for performance evaluation. 
C) Budgets help coordinate the activities of the entire organization. 
D) Budgeting forces managers to think ahead and formalize long-range objectives. 
E) The master budget should only be prepared by top management.

Question 2

Effective budgeting requires all of the following except:

Accepted Answer

A) Attainable goals. 
B) Determination of budgets by top levels of management. 
C) Evaluation processes that provide opportunities to explain any failures. 
D) Clear communication of all budgets. 
E) Adequate supporting documentation for the budget.

Question 3

The budgets within the master budget must be prepared in a definite sequence as dictated by GAAP.

Accepted Answer

A) True 
 B)False

Question 4

A budget is best described as:

Accepted Answer

A) A formal statement of a company's future plans usually expressed in monetary terms. 
B) A master control device. 
C) An informal statement of company future plans usually expressed in monetary terms. 
D) The most crucial component of a company evaluation process. 
E) The minimum acceptable performance level.

Question 5

A company reports the following information from its sales account and sales budget: $$\begin{array} { l l r } 
\text { Sales } & \text { May } & \$ 52,000 \
& \text { Jure } & 47,000 \
\text { Expected } & \text { July } & \$ 45,000 \
\text { Sales: } & & \
& \text { August } & 55,000 \
& \text { September } & 60,000
\end{array}$$ Cash sales are normally 30% of total sales and all credit sales are expected to be collected in the month following the date of sale.The total amount of cash expected to be received from customers in September is:

Accepted Answer

A) $58,500 
B) $56,500 
C) $60,000 
D) $80,500 
E) $55,000

Question 6

If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and cost of goods sold is expected to be $10,260, then budgeted purchases should be $9,160.

Accepted Answer

A) True 
 B)False

Question 7

The master budget process usually ends with:

Accepted Answer

A) The production budget. 
B) The sales budget. 
C) The selling expense budget. 
D) The budgeted balance sheet. 
E) The overhead budget.

Question 8

Kabuki Company's policy is to have 16% of the next month's sales as desired ending inventory.Estimated sales are shown in the following table.Given this data, what are Kabuki's estimated purchases for April? $\begin{array}{llll} 
& \text { March } & \text { April } & \text { May } \
\text { Expected sales units } & 9,400 & 8,900 & 7,300
\end{array}$

Accepted Answer

A) 8,584 
B) 9,176 
C) 8,644 
D) 9,256 
E) 9,000

Question 9

Indicate the order in which the following budgets would be completed (1 = first and so on)
______ (A)Cash budget
______ (B)Budgeted income statement
______ (C)Sales budget
______ (D)Production budget
______ (E)Operating expense budget

Accepted Answer

The answer of Indicate the order in which the following...

Question 10

The Palos Company expects sales for June, July, and August of $48,000, $54,000, and $44,000, respectively.Experience suggests that 40% of sales are for cash and 60% are on credit.The company collects 50% of its credit sales in the month following sale, 45% in the second month following sale, and 5% are not collected.What are the company's expected cash receipts for August from its current and past sales?

Accepted Answer

A) $29,160 
B) $46,760 
C) $61,160 
D) $66,200 
E) $78,800

Question 11

Financial budgets are normally completed after preparation of operating and capital expenditure budgets.

Accepted Answer

A) True 
 B)False

Question 12

Fairway's April sales forecast projects that 6,000 units will sell at a price of $10.50 per unit.The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units.Budgeted purchases of units in April would be:

Accepted Answer

A) 6,000 units 
B) 7,000 units 
C) 6,300 units 
D) 7,300 units 
E) Some other amount

Question 13

The master budget process nearly always begins with the preparation of the ___________________ and usually finishes with the preparation of the ______________________, the ________________, and the ______________________.

Accepted Answer

The answer of The master budget process nearly always begins...

Question 14

The usual budget period is:

Accepted Answer

A) An annual period of 250 working days. 
B) A monthly period separated into daily budgets. 
C) A quarterly period separated into weekly budgets. 
D) An annual period separated into weekly budgets. 
E) An annual period separated into quarterly and monthly budgets.

Question 15

Assume the Freshii Company is preparing its master budget for the first quarter of its calendar year.The following forecasted data relate to the first quarter:
 $\begin{array}{ll}
\text { Unit sales: }\
\text { January } & 40,000 \
\text { February } & 60,000 \
\text { March } & 50,000 \
\text { Unit sales price } & \$ 25 \
\text { Cost of goods sold per unit } & \$ 14\
\text { Expenses: }\
\text { Commissions } & 10 \% \text { of sales } \
\text { Rent } & \$ 20,000 / \text { month } \
\text { Advertising } & 15 \% \text { of sales } \
\text { Office salaries } & \$ 75,000 / \text { month } \
\text { Depreciation } & \$ 50,000 / \text { month } \
\text { Interest } & 15 \% \text { annually on a } \$ 250,000 \text { note } \
& \text { payable }\
\text { Tax rate }&40\%
\end{array}$ Prepare a budgeted income statement for this first quarter.

Accepted Answer

The answer of Assume the Freshii Company is preparing its...

Question 16

What is a production budget?

Accepted Answer

The answer of What is a production budget?...

Question 17

The budgeted balance sheet is prepared with data contained in the previously prepared components of the master budget.

Accepted Answer

A) True 
 B)False

Question 18

Next year's sales forecast shows that 20,000 units of Product A and 22,000 units of Product B are going to be sold for prices of $10 and $12, respectively. The desired ending inventory of Product A is 20% higher than its beginning inventory of 2,000 units. The beginning inventory of Product B is 2,500 units. The desired ending inventory of B is 3,000 units. 
-Budgeted purchases of Product A for the year would be:

Accepted Answer

A) 22,400 units 
B) 20,400 units 
C) 20,000 units 
D) 19,500 units 
E) 12,200 units

Question 19

The Lamb Company budgeted sales for January, February, and March of $96,000, $88,000, and $72,000, respectively.Seventy percent of sales are on credit.The company collects 60% of its credit sales in the month following sale, 35% in the second month following sale, and 5% is not collected.What are Lamb's expected cash receipts for March related to all current and past sales?

Accepted Answer

The answer of The Lamb Company budgeted sales for January,...

Question 20

Harold's expects its September sales to be 20% higher than its August sales of $150,000.Purchases were $100,000 in August and are expected to be $120,000 in September.All sales are on credit and are collected as follows: 30% in the month of the sale and 70% in the following month.Merchandise purchases are paid as follows: 25% in the month of purchase and 75% in the following month.The beginning cash balance on September 1 is $7,500.The ending cash balance on September 30 would be:

Accepted Answer

A) $31,500 
B) $67,500 
C) $54,000 
D) $61,500 
E) $136,500

Exam 7: Master Budgets and Performance Planning

Which of the following statements about budgeting is false?

Effective budgeting requires all of the following except:

The budgets within the master budget must be prepared in a definite sequence as dictated by GAAP.

A budget is best described as:

If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and cost of goods sold is expected to be $10,260, then budgeted purchases should be $9,160.

The master budget process usually ends with:

Indicate the order in which the following budgets would be completed (1 = first and so on) (A)Cash budget (B)Budgeted income statement (C)Sales budget (D)Production budget __ (E)Operating expense budget

Financial budgets are normally completed after preparation of operating and capital expenditure budgets.

Fairway's April sales forecast projects that 6,000 units will sell at a price of $10.50 per unit.The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units.Budgeted purchases of units in April would be:

The master budget process nearly always begins with the preparation of the _ and usually finishes with the preparation of the , the , and the ______.

The usual budget period is:

What is a production budget?

The budgeted balance sheet is prepared with data contained in the previously prepared components of the master budget.

Exam 7: Master Budgets and Performance Planning

Which of the following statements about budgeting is false?

Effective budgeting requires all of the following except:

The budgets within the master budget must be prepared in a definite sequence as dictated by GAAP.

A budget is best described as:

If budgeted beginning inventory is $8,300, budgeted ending inventory is $9,400, and cost of goods sold is expected to be $10,260, then budgeted purchases should be $9,160.

The master budget process usually ends with:

Indicate the order in which the following budgets would be completed (1 = first and so on) ______ (A)Cash budget ______ (B)Budgeted income statement ______ (C)Sales budget ______ (D)Production budget ______ (E)Operating expense budget

Financial budgets are normally completed after preparation of operating and capital expenditure budgets.

Fairway's April sales forecast projects that 6,000 units will sell at a price of $10.50 per unit.The desired ending inventory is 30% higher than the beginning inventory, which was 1,000 units.Budgeted purchases of units in April would be:

The master budget process nearly always begins with the preparation of the ___________________ and usually finishes with the preparation of the ______________________, the ________________, and the ______________________.

The usual budget period is:

What is a production budget?

The budgeted balance sheet is prepared with data contained in the previously prepared components of the master budget.

Indicate the order in which the following budgets would be completed (1 = first and so on) (A)Cash budget (B)Budgeted income statement (C)Sales budget (D)Production budget __ (E)Operating expense budget

The master budget process nearly always begins with the preparation of the _ and usually finishes with the preparation of the , the , and the ______.