Question 1

The cash budget is part of the operating budgets.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following must managers develop prior to preparing a budgeted income statement?

Accepted Answer

A)  Capital budget 
B)  Budgeted statement financial position 
C)  Support department budgets 
D)  Support department cost allocations 
A)  Capital budget 
B)  Budgeted statement financial position 
C)  Support department budgets 
D)  Support department cost allocations

Question 3

Budgeting is complex for multinational companies due to cultural and legal influences.

Accepted Answer

A) True 
 B)False

Question 4

The budgeted statement of financial position does NOT use information from which of the following:

Accepted Answer

A)  Budgeted statement of cash flows. 
B)  Cash budget. 
C)  Capital budget. 
D)  Budgeted income statement. 
A)  Budgeted statement of cash flows. 
B)  Cash budget. 
C)  Capital budget. 
D)  Budgeted income statement.

Question 5

Budgeted operating cash receipts are calculated using budgeted sales revenue.

Accepted Answer

A) True 
 B)False

Question 6

The ending inventories budget is typically expressed in terms of units, while the production budget is typically expressed in costs.

Accepted Answer

A) True 
 B)False

Question 7

Managers typically use excess cash to replay short term debt.

Accepted Answer

A) True 
 B)False

Question 8

Dividends paid to shareholders are shown in the budgeted statement of financial position and does not appear in the cash budget.

Accepted Answer

A) True 
 B)False

Question 9

Vaviano Ltd expects to sell 34,000 units of finished goods over the next 6-month period. The company has 10,000 units on hand and its managers want to have 14,000 units on hand at the end of the period. To produce one unit of finished product, two units of direct materials are needed. Vaviano has 100,000 units of direct material on hand and has budgeted for an ending inventory of 110,000 units. What is the amount of direct material to be purchased (in units)?

Accepted Answer

A)  38,000 
B)  66,000 
C)  86,000 
D)  76,000 
A)  38,000 
B)  66,000 
C)  86,000 
D)  76,000

Question 10

Retail entities do not require budgets for inventory.

Accepted Answer

A) True 
 B)False

Question 11

Budget variances can sometimes occur due to unanticipated changes in the price of direct materials, direct labour or overhead costs.

Accepted Answer

A) True 
 B)False

Question 12

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 goods sold for January?

Accepted Answer

A)  $150,000 
B)  $84,000 
C)  $188,000 
D)  $140,000 
A)  $150,000 
B)  $84,000 
C)  $188,000 
D)  $140,000

Question 13

Budgets are used to monitor performance and compare expected to actual results.

Accepted Answer

A) True 
 B)False

Question 14

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 are the anticipated cash receipts for January?

Accepted Answer

A)  $150,000 
B)  $60,000 
C)  $210,000 
D)  $135,000 
A)  $150,000 
B)  $60,000 
C)  $210,000 
D)  $135,000

Question 15

A budget is a formalised financial plan for organisational operations for a specific future period.

Accepted Answer

A) True 
 B)False

Question 16

Budgeted variable costs are likely to be understated if production volume is less than forecasted.

Accepted Answer

A) True 
 B)False

Question 17

Rainbow Legacy Ltd has the following balances at 31st December 2019: Cash $46,000; accounts receivable $34,000 ($10,000 from November and $24,000 from December); merchandise inventory $40,000; and accounts payable $20,000 (for merchandise purchases only). Budgeted sales follow:
$$\begin{array} { l l } 
\text { January } & \$ 100,000 \
\text { February } & \$ 180,000 \
\text { March } & \$ 120,000 \
\text { April } & \$ 200,000
\end{array}$$ Other data:
-Sales are 40% cash, 50% collected during the following month, and 10% collected during the second month after sale. A 3% cash discount is given on cash sales
-Cost of goods sold is 40% of sales
-Ending inventory must be 150% of the next month's cost of sales
-Purchases are paid 70% in month of purchase and 30% in the following month
-The selling and administrative cost function is: $6,000 + $0.2 × sales. This includes $1,000 for depreciation
-All costs are paid in the month incurred
-Minimum cash balance requirement is $6,000
The cash disbursements for purchases in March are:

Accepted Answer

A)  $78,000 
B)  $32,480 
C)  $81,200 
D)  $48,000 
A)  $78,000 
B)  $32,480 
C)  $81,200 
D)  $48,000

Question 18

Budgets help competitors understand an entity's activities for the next period.

Accepted Answer

A) True 
 B)False

Question 19

In a cash budget, operating cash disbursements include:

Accepted Answer

A)  Repayments of long-term debt. 
B)  Purchases of plant assets. 
C)  Payments of dividends 
D)  Payments to suppliers 
A)  Repayments of long-term debt. 
B)  Purchases of plant assets. 
C)  Payments of dividends 
D)  Payments to suppliers

Question 20

Gulland Rock Ltd uses the following flexible budget formula for monthly repair cost: total cost = $1,500 + $0.40 per machine hour. The annual operating budget calls for 25,000 hours of planned machine time. Budgeted repair cost is:

Accepted Answer

A)  $11,500 
B)  $14,700 
C)  $22,400 
D)  $22,000 
A)  $11,500 
B)  $14,700 
C)  $22,400 
D)  $22,000

The cash budget is part of the operating budgets.

Which of the following must managers develop prior to preparing a budgeted income statement?

Budgeting is complex for multinational companies due to cultural and legal influences.

The budgeted statement of financial position does NOT use information from which of the following:

Budgeted operating cash receipts are calculated using budgeted sales revenue.

The ending inventories budget is typically expressed in terms of units, while the production budget is typically expressed in costs.

Managers typically use excess cash to replay short term debt.

Dividends paid to shareholders are shown in the budgeted statement of financial position and does not appear in the cash budget.

Retail entities do not require budgets for inventory.

Budget variances can sometimes occur due to unanticipated changes in the price of direct materials, direct labour or overhead costs.

Budgets are used to monitor performance and compare expected to actual results.

A budget is a formalised financial plan for organisational operations for a specific future period.

Budgeted variable costs are likely to be understated if production volume is less than forecasted.

Budgets help competitors understand an entity's activities for the next period.

In a cash budget, operating cash disbursements include:

Gulland Rock Ltd uses the following flexible budget formula for monthly repair cost: total cost = $1,500 + $0.40 per machine hour. The annual operating budget calls for 25,000 hours of planned machine time. Budgeted repair cost is:

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

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Exam 6: Operational Budgets

The cash budget is part of the operating budgets.

Which of the following must managers develop prior to preparing a budgeted income statement?

Budgeting is complex for multinational companies due to cultural and legal influences.

The budgeted statement of financial position does NOT use information from which of the following:

Budgeted operating cash receipts are calculated using budgeted sales revenue.

The ending inventories budget is typically expressed in terms of units, while the production budget is typically expressed in costs.

Managers typically use excess cash to replay short term debt.

Dividends paid to shareholders are shown in the budgeted statement of financial position and does not appear in the cash budget.

Retail entities do not require budgets for inventory.

Budget variances can sometimes occur due to unanticipated changes in the price of direct materials, direct labour or overhead costs.

Budgets are used to monitor performance and compare expected to actual results.

A budget is a formalised financial plan for organisational operations for a specific future period.

Budgeted variable costs are likely to be understated if production volume is less than forecasted.

Budgets help competitors understand an entity's activities for the next period.

In a cash budget, operating cash disbursements include:

Gulland Rock Ltd uses the following flexible budget formula for monthly repair cost: total cost = $1,500 + $0.40 per machine hour. The annual operating budget calls for 25,000 hours of planned machine time. Budgeted repair cost is:

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