Question 1

Budgeted Balance sheets combine all of the following except:

Accepted Answer

A)  an estimate of financial position at the beginning of the budget period. 
B)  the estimated results of operations for the period (from the income statements). 
C)  estimated changes in assets and liabilities. 
D)  an examination of all revenues, costs, and other transactions in terms of their effects on cash. 
A)  an estimate of financial position at the beginning of the budget period. 
B)  the estimated results of operations for the period (from the income statements). 
C)  estimated changes in assets and liabilities. 
D)  an examination of all revenues, costs, and other transactions in terms of their effects on cash.

Question 2

Page Company makes 30% of its sales for cash and 70% on account. 60% of the credit sales are collected in the month of sale, 25% in the month following sale, and 12% in the second month following sale. The remainder is uncollectible. The following information has been gathered for the current year:
$$\begin{array} { | l | c | c | c | c | } 
\hline \text { Month } & 1 & 2 & 3 & 4 \
\hline \text { Total sales } & \$ 60,000 & \$ 70,000 & \$ 50,000 & \$ 30,000 \
\hline
\end{array}$$
Total cash receipts in Month 4 will be:

Accepted Answer

A)  $38,000. 
B)  $47,900. 
C)  $27,230. 
D)  $36,230. 
A)  $38,000. 
B)  $47,900. 
C)  $27,230. 
D)  $36,230.

Question 3

Rack Inc. bases its manufacturing overhead budget on budgeted direct labor-hours. The direct labor budget indicates that 3,700 direct labor-hours will be required in September. The variable overhead rate is $5.70 per direct labor-hour. The company's budgeted fixed manufacturing overhead is $48,100 per month, which includes depreciation of $5,550. All other fixed manufacturing overhead costs represent current cash flows. The company recomputes its predetermined overhead rate every month. The predetermined overhead rate for September should be:

Accepted Answer

A)  $5.70. 
B)  $13.00. 
C)  $18.70. 
D)  $17.20. 
A)  $5.70. 
B)  $13.00. 
C)  $18.70. 
D)  $17.20.

Question 4

In effect, the cash budget simply restates the budgeted income statement to the cash basis.

Accepted Answer

A) True 
 B)False

Question 5

In developing a master budget for a manufacturing company, which one of the following items should be done first?

Accepted Answer

A)  Development of a sales budget. 
B)  Development of the capital budget. 
C)  Determination of manufacturing capacity. 
D)  Determination of the advertising budget. 
A)  Development of a sales budget. 
B)  Development of the capital budget. 
C)  Determination of manufacturing capacity. 
D)  Determination of the advertising budget.

Question 6

Parlour Company, a retailer, has the following sales budget for the coming year.
 $$\begin{array} { l c } 
\text { Month } & \text { Sales } \
\text { January } & \$ 180,000 \
\text { February } & \$ 190,000 \
\text { March } & \$ 210,000 \
\text { April } & \$ 230,000
\end{array}$$ 
The sales price per unit is $10; the cost of sales is 70% of sales. Parlour keeps inventory equal to double the coming month's budgeted sales requirements. It pays for purchases 65% in the month of purchase and 35% in the month after purchase. Inventory at the beginning of January is $204,400. Accounts Payable on January 1 is $43,000.
Required:
a. Prepare a schedule of purchases, in units and in dollars, for the first three months of the year.
b. Prepare a schedule of cash disbursements on account for the first three months of the year.

Accepted Answer

a. @#IMG-DLM& b. @#IMG-DLM& Units sold: January: $180,000/$1

Question 7

The Colson Company has budgeted sales for the year as follows:
$$\begin{array} { | l | l | l | l | l | } 
\hline \text { Quarter } & 1 & 2 & 3 & 4 \
\hline \text { Sales in units } & 12,000 & 14,000 & 18,000 & 16,000 \
\hline
\end{array}$$
The ending inventory of finished goods for each quarter should equal 25% of the next quarter's budgeted sales in units. The finished goods inventory at the start of the year is 3,000 units. 
-Scheduled production for the third quarter is (in units)

Accepted Answer

A)  17,500 units. 
B)  18,500 units. 
C)  18,000 units. 
D)  16,500 units. 
A)  17,500 units. 
B)  18,500 units. 
C)  18,000 units. 
D)  16,500 units.

Question 8

Virginia Company, a merchandising firm, operated five sales offices last year at a total cost of $500,000, of which $70,000 represented fixed costs. Virginia has determined that total costs are significantly influenced by the number of sales offices operated. Last year's costs and number of sales offices can be used as the basis for predicting annual costs. What would be the budgeted cost for the coming year if Virginia were to operate seven sales offices? (CPA adapted)

Accepted Answer

A)  $700,000. 
B)  $672,000. 
C)  $602,000. 
D)  $586,000. 
A)  $700,000. 
B)  $672,000. 
C)  $602,000. 
D)  $586,000.

Question 9

The Kansas Company is preparing a cash budget for the month of July. The following information on accounts receivable collections is available from Kansas' past collection experience:
$\begin{array}{llr}
  \text { Percent of current month's sales collected this month } &15\%\
 \text {  Percent of prior month's sales collected this month  } &72\%\
 \text { Percent of sales two months prior to current month collected this month  } &6\%\
 \text {  Percent of sales three months prior to current month collected this month} &3\%\
\end{array}$

The remaining 4% are not collected and are written off as bad debts.
Credit sales to date are as follows:
$$\begin{array} { l l l } 
\text { July (estimated) } & \$ 150,000 \
\text { June } & \$ 135,000 \
\text { May } & \$ 120,000 \
\text { April } & \$ 145,000
\end{array}$$
What are the estimated collections in July?

Accepted Answer

A)  $125,250. 
B)  $131,250. 
C)  $133,250. 
D)  $137,250. 
A)  $125,250. 
B)  $131,250. 
C)  $133,250. 
D)  $137,250.

Question 10

A budget is the plan, stated in financial terms, of how an organization expects to carry out its activities and meet its goals.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a benefit of budgeting?

Accepted Answer

A)  It reduces the need for tracking actual cost activity. 
B)  It sets benchmarks for evaluation performance. 
C)  It uncovers potential bottlenecks. 
D)  It formalizes a manager's planning efforts. 
A)  It reduces the need for tracking actual cost activity. 
B)  It sets benchmarks for evaluation performance. 
C)  It uncovers potential bottlenecks. 
D)  It formalizes a manager's planning efforts.

Question 12

The amount of materials to be purchased during the budget period is equal to budgeted:

Accepted Answer

A)  total production needs plus units in the beginning materials inventory minus the units in the ending materials inventory. 
B)  total production needs plus units in the ending materials inventory minus the units in the beginning materials inventory. 
C)  units to be produced plus units in the beginning materials inventory minus the units in the ending materials inventory. 
D)  units to be produced plus units in the ending materials inventory minus the units in the beginning materials inventory. 
A)  total production needs plus units in the beginning materials inventory minus the units in the ending materials inventory. 
B)  total production needs plus units in the ending materials inventory minus the units in the beginning materials inventory. 
C)  units to be produced plus units in the beginning materials inventory minus the units in the ending materials inventory. 
D)  units to be produced plus units in the ending materials inventory minus the units in the beginning materials inventory.

Question 13

Oklahoma Telephone Company has been forced by competition to put much more emphasis on planning and controlling its costs. Accordingly, the company's controller has suggested initiating a formal budgeting process. Which of the following steps will not help the company gain maximum acceptance by employees of the proposed budgeting system? (CMA adapted)

Accepted Answer

A)  Implementing the change quickly. 
B)  Including in departmental responsibility reports only those items that are under the department manager's control. 
C)  Demonstrating top management support for the budgeting program. 
D)  Ensuring that favorable deviations of actual results from the budget, as well as unfavorable deviations, are discussed with the responsible managers. 
A)  Implementing the change quickly. 
B)  Including in departmental responsibility reports only those items that are under the department manager's control. 
C)  Demonstrating top management support for the budgeting program. 
D)  Ensuring that favorable deviations of actual results from the budget, as well as unfavorable deviations, are discussed with the responsible managers.

Question 14

Albert Corporation is a wholesaler of industrial goods. Data regarding the store's operations follow:
? Sales are budgeted at $350,000 for November, $360,000 for December, and $340,000 for January.
? Collections are expected to be 60% in the month of sale, 39% in the month following the sale, and 1% uncollectible.
? The cost of goods sold is 75% of sales.
? The company purchases 40% of its merchandise in the month prior to the month of sale and 60% in the month of sale. Payment for merchandise is made in the month following the purchase.
? The November beginning balance in the accounts receivable account is $70,000.
? The November beginning balance in the accounts payable account is $257,000.
Required:
a. Prepare a Schedule of Expected Cash Collections for November and December.
b. Prepare a Merchandise Purchases Budget for November and December.

Accepted Answer

a. \[\begin{array} { l r r } 
& \text {

Question 15

Which of the following statements is not correct?

Accepted Answer

A)  The sales budget is the starting point in preparing the master budget. 
B)  The sales budget is constructed by multiplying the expected sales in units by the sales price. 
C)  Using methods such as trend analysis and the Delphi technique can help reduce subjectivity in forecasting sales. 
D)  The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period. 
A)  The sales budget is the starting point in preparing the master budget. 
B)  The sales budget is constructed by multiplying the expected sales in units by the sales price. 
C)  Using methods such as trend analysis and the Delphi technique can help reduce subjectivity in forecasting sales. 
D)  The cash budget must be prepared prior to the sales budget because managers want to know the expected cash collections on sales made to customers in prior periods before projecting sales for the current period.

Question 16

The master budget process usually begins with the: (CMA adapted)

Accepted Answer

A)  production budget. 
B)  operating budget. 
C)  financial budget. 
D)  sales budget. 
A)  production budget. 
B)  operating budget. 
C)  financial budget. 
D)  sales budget.

Question 17

Folkes, Inc has prepared a sales budget for the second quarter as shown below:
 $$\begin{array} { l c } 
& \text { Budgeted Sales } \
\text { April } & \$ 400,000 \
\text { May } & 500,000 \
\text { June } & 600,000
\end{array}$$ 
The company is in the process of preparing a cash budget for the second quarter. To this end, the following information has been assembled:
 $$\begin{array} { l c } 
& \text { Collections on Sales } \
\text { In month of sale } &70 \%\
\text { In month following sale } & 25 \%   \
\text { In second month following sale } &5\%\
\end{array}$$ 
The company gives a 1% cash discount to customers paying in the month of the sale. Records show past sales to be: January $300,000, February $340,000, and March $360,000.
Required:
Prepare a schedule of cash receipts for the third quarter.

Accepted Answer

The answer of Folkes, Inc has prepared a sales budget...

Question 18

Budgeted production needs are determined by:

Accepted Answer

A)  adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total. 
B)  adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total. 
C)  adding budgeted sales in units to the desired ending inventory in units. 
D)  deducting the beginning inventory in units from budgeted sales in units. 
A)  adding budgeted sales in units to the desired ending inventory in units and deducting the beginning inventory in units from this total. 
B)  adding budgeted sales in units to the beginning inventory in units and deducting the desired ending inventory in units from this total. 
C)  adding budgeted sales in units to the desired ending inventory in units. 
D)  deducting the beginning inventory in units from budgeted sales in units.

Question 19

Ethical conflicts can occur in the budgeting process because managers supply information for the budgets that are then used to evaluate their performance.

Accepted Answer

A) True 
 B)False

Question 20

In general, the first budget prepared is the:

Accepted Answer

A)  production budget. 
B)  direct labor budget. 
C)  sales budget. 
D)  overhead budget. 
A)  production budget. 
B)  direct labor budget. 
C)  sales budget. 
D)  overhead budget.

Budgeted Balance sheets combine all of the following except:

In effect, the cash budget simply restates the budgeted income statement to the cash basis.

In developing a master budget for a manufacturing company, which one of the following items should be done first?

A budget is the plan, stated in financial terms, of how an organization expects to carry out its activities and meet its goals.

Which of the following is not a benefit of budgeting?

The amount of materials to be purchased during the budget period is equal to budgeted:

Which of the following statements is not correct?

The master budget process usually begins with the: (CMA adapted)

Budgeted production needs are determined by:

Ethical conflicts can occur in the budgeting process because managers supply information for the budgets that are then used to evaluate their performance.

In general, the first budget prepared is the:

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

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Exam 13: Planning and Budgeting

Budgeted Balance sheets combine all of the following except:

In effect, the cash budget simply restates the budgeted income statement to the cash basis.

In developing a master budget for a manufacturing company, which one of the following items should be done first?

A budget is the plan, stated in financial terms, of how an organization expects to carry out its activities and meet its goals.

Which of the following is not a benefit of budgeting?

The amount of materials to be purchased during the budget period is equal to budgeted:

Which of the following statements is not correct?

The master budget process usually begins with the: (CMA adapted)

Budgeted production needs are determined by:

Ethical conflicts can occur in the budgeting process because managers supply information for the budgets that are then used to evaluate their performance.

In general, the first budget prepared is the:

Cost Accounting: Information for Decision Making

Cost Concepts and Behavior

Fundamentals of Cost-Volume-Profit Analysis

Fundamentals of Cost Analysis for Decision Making

Cost Estimation

Fundamentals of Product and Service Costing

Job Costing

Process Costing

Activity-Based Costing

Fundamentals of Cost Management

Service Department and Joint Cost Allocation

Fundamentals of Management Control Systems

Business Unit Performance Measurement

Transfer Pricing

Fundamentals of Variance Analysis

Additional Topics in Variance Analysis

Performance Measurement to Support Business Strategy

Filters