Question 1

The master budget includes two components: an operating budget and a flexible budget.

Accepted Answer

A) True 
 B)False

Question 2

Cash receipts, cash disbursements and short term borrowing or investments all appear in the cash budget.

Accepted Answer

A) True 
 B)False

Question 3

In 2018, Flowers Ltd budgeted its sales volume at 10,000 units. Actual volume was 9,800 units. If Flowers Ltd uses the static budget to calculate variances and assuming that inventory levels are insignificant, which of the following statements is true?

Accepted Answer

A)  Budgeted variable costs will be overstated compared to actual variable costs 
B)  Profits will be less than expected 
C)  Profits will be more than expected due to favourable cost variances 
D)  Sales managers will not receive a bonus 
A)  Budgeted variable costs will be overstated compared to actual variable costs 
B)  Profits will be less than expected 
C)  Profits will be more than expected due to favourable cost variances 
D)  Sales managers will not receive a bonus

Question 4

Differences between budgeted amounts and actual amounts are called budget benchmarks.

Accepted Answer

A) True 
 B)False

Question 5

Poster Artist Ltd, a retail store selling classic and rare marketing materials, has just completed its master budget for the next fiscal year. Ending inventory is budgeted at 20% of cost of goods available for sale. Selected data from that process appear in the table below: $$\begin{array} { l l } 
\text { Begirring irventory } & \$ 20,000 \
\text { Budgeted purchases } & 50,000 \
\text { Expected reverue } & 150,000 \
\text { Irflows of cash } & 120,000 \
\text { Support departments costs } & 30,000 \
\text { Total cash outflows } & 80,000
\end{array}$$ Poster Artist Ltd's budgeted gross profit for the next fiscal year will be:

Accepted Answer

A)  $136,000 
B)  $106,000 
C)  $64,000 
D)  $94,000 
A)  $136,000 
B)  $106,000 
C)  $64,000 
D)  $94,000

Question 6

Zariz Ltd budgeted product costs for the third quarter of 2019 were based on an expected volume of 2,000 units. The budgeted unit costs appear below: $\begin{array}{lr}
\text { Direct material } & \$ 1.50 \
\text { Direct labor } & 2.25 \
\text { Variable overhead } & 4.25 \
\text { Fixed overhead } & \underline{3.00} \
\quad \text { Total } & \underline{\$ 11.00} \

\end{array}$
 Zariz Ltd's total budgeted product cost for the third quarter of 2019 was:

Accepted Answer

A)  $16,500 
B)  $22,000 
C)  $4,500 
D)  $16,000 
A)  $16,500 
B)  $22,000 
C)  $4,500 
D)  $16,000

Question 7

The master budget reflects the entity's future operating and financing decisions and is often summarized in a set of budgeted financial statements.

Accepted Answer

A) True 
 B)False

Question 8

The operating budget is another name for master budget.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not an objective of budgeting?

Accepted Answer

A)  Assigning decision rights. 
B)  Establishing prices for the internal transfer of goods and services. 
C)  Motivating managers to use resources efficiently. 
D)  Improving customer relations. 
A)  Assigning decision rights. 
B)  Establishing prices for the internal transfer of goods and services. 
C)  Motivating managers to use resources efficiently. 
D)  Improving customer relations.

Question 10

Managers need information from about current beginning inventories and required ending inventories to prepare the capital budget.

Accepted Answer

A) True 
 B)False

Question 11

Cash payments are always budgeted to take place in the month in which the transaction is budgeted to occur.

Accepted Answer

A) True 
 B)False

Question 12

One way to decrease budgetary slack is to offer bonuses for accurate forecasts.

Accepted Answer

A) True 
 B)False

Question 13

A budget cycle refers to the length of time that the budget period covers.

Accepted Answer

A) True 
 B)False

Question 14

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. How much material A must be purchased in quarter 2?

Accepted Answer

A)  78 
B)  80 
C)  156 
D)  16 
A)  78 
B)  80 
C)  156 
D)  16

Question 15

At the end of 2019, Dubai Mission prepared its master budget for 2020. Selected amounts from that budget, along with actual results for 2020, are presented below: $$\begin{array} { l r r } 
& \underline { \text { Budgeted } } & \underline { \text { Actual } } \
\text { Sales } & \$ 180,000 & \$ 210,000 \
\text { Research and development cost } & 25,000 & 20,000 \
\text { Interest revenue } & 7,600 & 7,000 \
\text { Cost of goods sold } & 60,000 & 65,000 \
\text { Marketing costs } & 45,000 & 45,000
\end{array}$$ The variance for cost of goods sold could be explained by:

Accepted Answer

A)  Increased rent on their building 
B)  Actual sales being less than the budget 
C)  Price increases in raw materials 
D)  Decreased labour costs 
A)  Increased rent on their building 
B)  Actual sales being less than the budget 
C)  Price increases in raw materials 
D)  Decreased labour costs

Question 16

Preparation of the operating budgets should start with the capital budget.

Accepted Answer

A) True 
 B)False

Question 17

When evaluating actual results at the end of an accounting period, the flexible budget provides the appropriate benchmark for actual operations.

Accepted Answer

A) True 
 B)False

Question 18

An organization operating in a highly competitive and volatile environment is likely to have more significant budget variances than an established business with low uncertainty about business operations.

Accepted Answer

A) True 
 B)False

Question 19

The production budget requires a forecasted level of sales volume.

Accepted Answer

A) True 
 B)False

Question 20

A favourable variance may be caused by efficient use of resources or less activity than expected.

Accepted Answer

A) True 
 B)False

The master budget includes two components: an operating budget and a flexible budget.

Cash receipts, cash disbursements and short term borrowing or investments all appear in the cash budget.

In 2018, Flowers Ltd budgeted its sales volume at 10,000 units. Actual volume was 9,800 units. If Flowers Ltd uses the static budget to calculate variances and assuming that inventory levels are insignificant, which of the following statements is true?

Differences between budgeted amounts and actual amounts are called budget benchmarks.

The master budget reflects the entity's future operating and financing decisions and is often summarized in a set of budgeted financial statements.

The operating budget is another name for master budget.

Which of the following is not an objective of budgeting?

Managers need information from about current beginning inventories and required ending inventories to prepare the capital budget.

Cash payments are always budgeted to take place in the month in which the transaction is budgeted to occur.

One way to decrease budgetary slack is to offer bonuses for accurate forecasts.

A budget cycle refers to the length of time that the budget period covers.

Preparation of the operating budgets should start with the capital budget.

When evaluating actual results at the end of an accounting period, the flexible budget provides the appropriate benchmark for actual operations.

An organization operating in a highly competitive and volatile environment is likely to have more significant budget variances than an established business with low uncertainty about business operations.

The production budget requires a forecasted level of sales volume.

A favourable variance may be caused by efficient use of resources or less activity than expected.

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

The master budget includes two components: an operating budget and a flexible budget.

Cash receipts, cash disbursements and short term borrowing or investments all appear in the cash budget.

In 2018, Flowers Ltd budgeted its sales volume at 10,000 units. Actual volume was 9,800 units. If Flowers Ltd uses the static budget to calculate variances and assuming that inventory levels are insignificant, which of the following statements is true?

Differences between budgeted amounts and actual amounts are called budget benchmarks.

The master budget reflects the entity's future operating and financing decisions and is often summarized in a set of budgeted financial statements.

The operating budget is another name for master budget.

Which of the following is not an objective of budgeting?

Managers need information from about current beginning inventories and required ending inventories to prepare the capital budget.

Cash payments are always budgeted to take place in the month in which the transaction is budgeted to occur.

One way to decrease budgetary slack is to offer bonuses for accurate forecasts.

A budget cycle refers to the length of time that the budget period covers.

Preparation of the operating budgets should start with the capital budget.

When evaluating actual results at the end of an accounting period, the flexible budget provides the appropriate benchmark for actual operations.

An organization operating in a highly competitive and volatile environment is likely to have more significant budget variances than an established business with low uncertainty about business operations.

The production budget requires a forecasted level of sales volume.

A favourable variance may be caused by efficient use of resources or less activity than expected.

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