Question 1

Participative budgeting involves customers and managers at all levels in the organisation.

Accepted Answer

A) True 
 B)False  False

Question 2

The flexible budget uses actual volume to calculate variable costs.

Accepted Answer

A) True 
 B)False  True

Question 3

Decision rights refer to the responsibility and financial decision making authority of each individual manager.

Accepted Answer

A) True 
 B)False  True

Question 4

An advantage of a flexible budget is that it:

Accepted Answer

A)  Considers only variable costs 
B)  Incorporates adjustments caused by volume changes 
C)  Allows management freedom in meeting goals 
D)  Allows comparison of actual costs to master budget costs 
A)  Considers only variable costs 
B)  Incorporates adjustments caused by volume changes 
C)  Allows management freedom in meeting goals 
D)  Allows comparison of actual costs to master budget costs

Question 5

Sales of $550,000 are forecast for the third quarter. Gross profit is 40% of sales, and beginning inventory is $165,000. If ending inventory is budgeted as $215,000, what are the budgeted purchases?

Accepted Answer

A)  $270,000 
B)  $330,000 
C)  $165,000 
D)  $380,000 
A)  $270,000 
B)  $330,000 
C)  $165,000 
D)  $380,000

Question 6

The purpose of the cash budget is to ensure that that entity has sufficient cash for future expansion.

Accepted Answer

A) True 
 B)False

Question 7

Carpe Diem Ltd expects to operate at a loss in its next fiscal year. Which statement about its budgeted income statement is true?

Accepted Answer

A)  Operating expenses are expected to be greater than gross profit 
B)  Operating income is expected to be greater than net profit 
C)  Net profit is expected to be greater than operating income 
D)  Actual gross profit less operating expenses will equal expected net profit 
A)  Operating expenses are expected to be greater than gross profit 
B)  Operating income is expected to be greater than net profit 
C)  Net profit is expected to be greater than operating income 
D)  Actual gross profit less operating expenses will equal expected net profit

Question 8

Profit sharing, cash bonus schemes and awards dinners are all ways of rewarding employees who achieve budget targets.

Accepted Answer

A) True 
 B)False

Question 9

The master budget starts with a series of assumptions about future events and activities.

Accepted Answer

A) True 
 B)False

Question 10

Super Solar Systems has forecast the following unit sales and production for the next year, by quarter: $$\begin{array} { | l | l | l | l | l | } 
\hline & 1 ^ { \text {st } } & 2 ^ { \text {nd } } & 3 ^ { \text {rd } } & 4 ^ { \text {th } } \
\hline \text { Production } & 75 & 80 & 70 & 50 \
\hline \text { Sales } & 60 & 70 & 75 & 60 \
\hline
\end{array}$$ Super Solar has the following beginning inventories:
$$\begin{array} { | l | l | } 
\hline \text { Firished Goods } & 50 \
\hline \text { Direct Material A } & 50 \
\hline \text { Direct Material B } & 50 \
\hline
\end{array}$$ A finished unit requires one unit of material A and two units of material
B  There should be enough material on hand at the end of each quarter to meet 20% of the next quarter's production needs. There are no work-in-process inventories. What is the ending inventory for material A for quarter 2?

Accepted Answer

A)  70 
B)  14 
C)  82 
D)  60 
A)  70 
B)  14 
C)  82 
D)  60

Question 11

Limelite Ltd, projects sales for its first three months of operation as follows: $$\begin{array} { | l | l | l | l | } 
\hline & \text { Jaruary } & \text { February } & \text { March } \
\hline \text { Credit Sales } & \$ 150,000 & \$ 188,000 & \$ 176,000 \
\hline \text { Cash Sales } & \$ 60,000 & \$ 50,000 & \$ 55,000 \
\hline & \$ 210,000 & \$ 238,000 & \$ 231,000 \
\hline
\end{array}$$ Inventory on 1st January is $40,000. Subsequent beginning inventories should be 40% of that month's cost of goods sold. Goods are priced at 140% of their cost. 50% of purchases are paid for in the month of purchase; the balance is paid in the following month. It is expected that 50% of credit sales will be collected in the month following sale, 30% in the second month following the sale, and the balance the third month. A 5% discount is given if payment is received in the month following sale.
What is the projected cost of purchases for January?

Accepted Answer

A)  $80,000 
B)  $68,000 
C)  $120,000 
D)  $178,000 
A)  $80,000 
B)  $68,000 
C)  $120,000 
D)  $178,000

Question 12

The correct sequence for the following components in the operating budget is:
I. Sales Forecast
II. Production Budget
III. Revenue Budget
IV. Budgeted Cost of Sales

Accepted Answer

A)  I, II, III, IV 
B)  III, I, IV, II 
C)  I, III, II, IV 
D)  IV, I, III, II 
A)  I, II, III, IV 
B)  III, I, IV, II 
C)  I, III, II, IV 
D)  IV, I, III, II

Question 13

A flexible budget is used at the end of a period to evaluate the accuracy of the original master budget.

Accepted Answer

A) True 
 B)False

Question 14

An unfavourable variance occurs when actual costs are lower than budgeted costs.

Accepted Answer

A) True 
 B)False

Question 15

Budgets are generally developed for the organisation as a whole as department managers do not have budget authority.

Accepted Answer

A) True 
 B)False

Question 16

In government organisations budgets can be used to place restrictions on spending authority.

Accepted Answer

A) True 
 B)False

Question 17

The sales volume and revenue budget is linked to the organisational strategy.

Accepted Answer

A) True 
 B)False

Question 18

The operating budget is a comprehensive plan of the entity's entire financial and operational activities for an upcoming financial period.

Accepted Answer

A) True 
 B)False

Question 19

Uncontrollable external factors can create challenges in measuring the results for which managers should be held responsible. Which of the following is the best example of an uncontrollable external factor for a manager who oversees all of the operations for a business?

Accepted Answer

A)  Production volumes were above normal levels so that overtime was paid to direct labour employees 
B)  Poor quality direct materials were purchased so more materials than usual were required in the manufacturing process 
C)  Raw materials prices increased due to a global shortage 
D)  Utilities costs were higher than normal even though weather and usage were typical for that time of year 
A)  Production volumes were above normal levels so that overtime was paid to direct labour employees 
B)  Poor quality direct materials were purchased so more materials than usual were required in the manufacturing process 
C)  Raw materials prices increased due to a global shortage 
D)  Utilities costs were higher than normal even though weather and usage were typical for that time of year

Question 20

Depreciation is a cash outflow in the cash budget.

Accepted Answer

A) True 
 B)False

Participative budgeting involves customers and managers at all levels in the organisation.

The flexible budget uses actual volume to calculate variable costs.

Decision rights refer to the responsibility and financial decision making authority of each individual manager.

An advantage of a flexible budget is that it:

Sales of $550,000 are forecast for the third quarter. Gross profit is 40% of sales, and beginning inventory is $165,000. If ending inventory is budgeted as $215,000, what are the budgeted purchases?

The purpose of the cash budget is to ensure that that entity has sufficient cash for future expansion.

Carpe Diem Ltd expects to operate at a loss in its next fiscal year. Which statement about its budgeted income statement is true?

Profit sharing, cash bonus schemes and awards dinners are all ways of rewarding employees who achieve budget targets.

The master budget starts with a series of assumptions about future events and activities.

The correct sequence for the following components in the operating budget is: I. Sales Forecast II. Production Budget III. Revenue Budget IV. Budgeted Cost of Sales

A flexible budget is used at the end of a period to evaluate the accuracy of the original master budget.

An unfavourable variance occurs when actual costs are lower than budgeted costs.

Budgets are generally developed for the organisation as a whole as department managers do not have budget authority.

In government organisations budgets can be used to place restrictions on spending authority.

The sales volume and revenue budget is linked to the organisational strategy.

The operating budget is a comprehensive plan of the entity's entire financial and operational activities for an upcoming financial period.

Uncontrollable external factors can create challenges in measuring the results for which managers should be held responsible. Which of the following is the best example of an uncontrollable external factor for a manager who oversees all of the operations for a business?

Depreciation is a cash outflow in the cash budget.

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

A Costing Framework and Cost Allocation

Costvolumeprofit Cvp Analysis

Planning Budgeting and Behaviour

Job and Process Costing Systems

Flexible Budgets, Standard Costs and Variance Analysis

Variance Analysis: Revenue and Cost

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Strategy and Control

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters

Exam 6: Operational Budgets

Participative budgeting involves customers and managers at all levels in the organisation.

The flexible budget uses actual volume to calculate variable costs.

Decision rights refer to the responsibility and financial decision making authority of each individual manager.

An advantage of a flexible budget is that it:

Sales of $550,000 are forecast for the third quarter. Gross profit is 40% of sales, and beginning inventory is $165,000. If ending inventory is budgeted as $215,000, what are the budgeted purchases?

The purpose of the cash budget is to ensure that that entity has sufficient cash for future expansion.

Carpe Diem Ltd expects to operate at a loss in its next fiscal year. Which statement about its budgeted income statement is true?

Profit sharing, cash bonus schemes and awards dinners are all ways of rewarding employees who achieve budget targets.

The master budget starts with a series of assumptions about future events and activities.

The correct sequence for the following components in the operating budget is: I. Sales Forecast II. Production Budget III. Revenue Budget IV. Budgeted Cost of Sales

A flexible budget is used at the end of a period to evaluate the accuracy of the original master budget.

An unfavourable variance occurs when actual costs are lower than budgeted costs.

Budgets are generally developed for the organisation as a whole as department managers do not have budget authority.

In government organisations budgets can be used to place restrictions on spending authority.

The sales volume and revenue budget is linked to the organisational strategy.

The operating budget is a comprehensive plan of the entity's entire financial and operational activities for an upcoming financial period.

Uncontrollable external factors can create challenges in measuring the results for which managers should be held responsible. Which of the following is the best example of an uncontrollable external factor for a manager who oversees all of the operations for a business?

Depreciation is a cash outflow in the cash budget.

The Role of Accounting Information in Management Decision Making

Cost Concepts, Behaviour and Estimation

A Costing Framework and Cost Allocation

Costvolumeprofit Cvp Analysis

Planning Budgeting and Behaviour

Job and Process Costing Systems

Flexible Budgets, Standard Costs and Variance Analysis

Variance Analysis: Revenue and Cost

Activity Analysis: Costing and Management

Relevant Costs for Decision Making

Strategy and Control

Capital Budgeting and Strategic Investment Decisions

The Strategic Management of Costs and Revenues

Strategic Management Control: a Lean Perspective

Responsibility Accounting, Performance Evaluation and Transfer Pricing

The Balanced Scorecard and Strategy Maps

Rewards, Incentives and Risk Management

Sustainability Management Accounting

Filters