Question 1

Long-range planning

Accepted Answer

A)  generally presents more detailed information than an annual budget. 
B)  generally encompasses a longer period of time than an annual budget. 
C)  is usually more accurate than an annual budget. 
D)  is prepared on a quarterly basis if the budget is prepared on a quarterly basis. 
A)  generally presents more detailed information than an annual budget. 
B)  generally encompasses a longer period of time than an annual budget. 
C)  is usually more accurate than an annual budget. 
D)  is prepared on a quarterly basis if the budget is prepared on a quarterly basis. B

Question 2

Budgeting is usually most closely associated with which management function?

Accepted Answer

A)  Planning 
B)  Directing 
C)  Motivating 
D)  Controlling 
A)  Planning 
B)  Directing 
C)  Motivating 
D)  Controlling A

Question 3

Chain Inc. provided the following information:

$\begin{array}{llcc}
& \text {  April } &  \text {May  } &  \text { June } \
\text { Projected merchandise purchases } &\$ 92,000 & \$ 80,000 & \$ 6,000\
\end{array}$
  Chain pays 40% of merchandise purchases in the month purchased and 60% in the following month.
$\bullet$General operating expenses are budgeted to be $31000 per month of which depreciation is $3000 of this amount. Chain pays operating expenses in the month incurred.
$\bullet$Chain makes loan payments of $4000 per month of which $450 is interest and the remainder is principal.
Instructions
Calculate budgeted cash disbursements for May.

Accepted Answer

$\begin{array}{ll}
\text { Budqeted cash disbursements for purchases: }\
\text { Cash paid for May purchases }(\$ 80,000 \times 40 \%) & \$ 32,000 \
\text { Cash paid for April purchases }(\$ 92,000 \times 60 \%) & 55,200 \
\quad \text { Budgeted cash paid for purchases } & 87,200\
 \text { Budgeted cash payments for operating expenses  (\$ 31,000-\$ 3,000)  } &28,000\
 \text { Budgeted cash payments for loan $ (\$ 4,000-\$ 450) $ } &3,550\
 \text { Budgeted cash payments for interest } &450\
 \text {  Total budgeted cash dishursements for May } &\$119,200\
\end{array}$

Question 4

The master budget consists of operating and financial budgets.

Accepted Answer

A) True 
 B)False

Question 5

The formula for determining budgeted merchandise purchases is budgeted

Accepted Answer

A)  production + desired ending inventory - beginning inventory. 
B)  sales + beginning inventory - desired ending inventory. 
C)  cost of goods sold + desired ending inventory - beginning inventory. 
D)  cost of goods sold + beginning inventory - desired ending inventory. 
A)  production + desired ending inventory - beginning inventory. 
B)  sales + beginning inventory - desired ending inventory. 
C)  cost of goods sold + desired ending inventory - beginning inventory. 
D)  cost of goods sold + beginning inventory - desired ending inventory.

Question 6

A purchases budget is used instead of a production budget by

Accepted Answer

A)  merchandising companies. 
B)  service enterprises. 
C)  not-for-profit organizations. 
D)  manufacturing companies. 
A)  merchandising companies. 
B)  service enterprises. 
C)  not-for-profit organizations. 
D)  manufacturing companies.

Question 7

The culmination of preparing operating budgets is the

Accepted Answer

A)  budgeted balance sheet. 
B)  production budget. 
C)  cash budget. 
D)  budgeted income statement. 
A)  budgeted balance sheet. 
B)  production budget. 
C)  cash budget. 
D)  budgeted income statement.

Question 8

An unrealistic budget is more likely to result when it

Accepted Answer

A)  has been developed in a top down fashion. 
B)  has been developed in a bottom up fashion. 
C)  has been developed by all levels of management. 
D)  is developed with performance appraisal usages in mind. 
A)  has been developed in a top down fashion. 
B)  has been developed in a bottom up fashion. 
C)  has been developed by all levels of management. 
D)  is developed with performance appraisal usages in mind.

Question 9

Of the following items which one is not obtained from an individual operating budget?

Accepted Answer

A)  Selling and administrative expenses 
B)  Accounts receivable 
C)  Cost of goods sold 
D)  Sales 
A)  Selling and administrative expenses 
B)  Accounts receivable 
C)  Cost of goods sold 
D)  Sales

Question 10

The direct materials budget shows: $\begin{array}{ll}
\text { Units to be produced } & 3,000 \
\text { Total pounds needed for production } & 9,000 \
\text { Total materials required } & 9,900
\end{array}$ What are the direct materials per unit?

Accepted Answer

A)  .33 pounds 
B)  3.0 pounds 
C)  3.3 pounds 
D)  Cannot be determined from the data provided. 
A)  .33 pounds 
B)  3.0 pounds 
C)  3.3 pounds 
D)  Cannot be determined from the data provided.

Question 11

The flow of input data for budgeting should be from the highest levels of responsibility to the lowest.

Accepted Answer

A) True 
 B)False

Question 12

On January 1 Witt Company has a beginning cash balance of $126000. During the year the company expects cash disbursements of $1020000 and cash receipts of $870000. If Witt requires an ending cash balance of $120000 Witt Company must borrow

Accepted Answer

A)  $96000. 
B)  $120000. 
C)  $144000. 
D)  $276000. 
A)  $96000. 
B)  $120000. 
C)  $144000. 
D)  $276000.

Question 13

Pitt Corp. makes and sells a single product widgets. Two pounds of sand are needed to make one widget. Budgeted production of widgets for the next two months follows:
September 25000 units
October 31000 units
The company wants to maintain monthly ending inventories of sand equal to 20% of the following month's production needs. On August 31 10000 pounds of sand were on hand.
Instructions
How much sand should be purchased in September?

Accepted Answer

None

Question 14

The financial budgets include the

Accepted Answer

A)  cash budget and the selling and administrative expense budget. 
B)  cash budget and the budgeted balance sheet. 
C)  budgeted balance sheet and the budgeted income statement. 
D)  cash budget and the production budget. 
A)  cash budget and the selling and administrative expense budget. 
B)  cash budget and the budgeted balance sheet. 
C)  budgeted balance sheet and the budgeted income statement. 
D)  cash budget and the production budget.

Question 15

Instead of a production budget a merchandiser will prepare a

Accepted Answer

A)  pseudo-production budget. 
B)  merchandise purchases budget. 
C)  master time sheet. 
D)  sales forecast. 
A)  pseudo-production budget. 
B)  merchandise purchases budget. 
C)  master time sheet. 
D)  sales forecast.

Question 16

The ________________ is a set of interrelated budgets that constitutes a plan of action for a specified period of time.

Accepted Answer

The answer of The ________________ is a set of interrelated...

Question 17

An overly optimistic sales budget may result in

Accepted Answer

A)  increases in selling prices late in the year. 
B)  insufficient inventories. 
C)  increased sales during the year. 
D)  excessive inventories. 
A)  increases in selling prices late in the year. 
B)  insufficient inventories. 
C)  increased sales during the year. 
D)  excessive inventories.

Question 18

Budgeting and long-range planning are two terms that describe the same process.

Accepted Answer

A) True 
 B)False

Question 19

The management of Ocean Industries estimates that credit sales for August September October and November will be $540000 $750000 $840000 and $480000 respectively. Experience has shown that collections are made as follows: $$\begin{array} { l l } 
\text { In month of sale } & 25 \% \
\text { In first month after sale } & 60 \% \
\text { In second month after sale } & 10 \%
\end{array}$$ Instructions
Determine the collections from customers in October and November. Show all computations.

Accepted Answer

The answer of The management of Ocean Industries estimates that...

Question 20

Thread Company is preparing its manufacturing overhead budget for 2016. Relevant data consist of the following.
Units to be produced (by quarters): 10000 12000 14000 16000.
Direct labor: Time is 1 hour per unit.
Variable overhead costs per direct labor hour: Indirect materials $0.80; indirect labor $1.20; and maintenance $0.50.
Fixed overhead costs per quarter: Supervisory salaries $42000; depreciation $16000; and maintenance $12000.
Instructions
Prepare the manufacturing overhead budget for the year showing quarterly data.

Accepted Answer

The answer of Thread Company is preparing its manufacturing overhead...

Exam 23: Budgetary Planning

Long-range planning

Budgeting is usually most closely associated with which management function?

The master budget consists of operating and financial budgets.

The formula for determining budgeted merchandise purchases is budgeted

A purchases budget is used instead of a production budget by

The culmination of preparing operating budgets is the

An unrealistic budget is more likely to result when it

Of the following items which one is not obtained from an individual operating budget?

The direct materials budget shows: Units to be produced 3,000 Total pounds needed for production 9,000 Total materials required 9,900 What are the direct materials per unit?

The flow of input data for budgeting should be from the highest levels of responsibility to the lowest.

On January 1 Witt Company has a beginning cash balance of $126000. During the year the company expects cash disbursements of $1020000 and cash receipts of $870000. If Witt requires an ending cash balance of $120000 Witt Company must borrow

The financial budgets include the

Instead of a production budget a merchandiser will prepare a

The ________________ is a set of interrelated budgets that constitutes a plan of action for a specified period of time.

An overly optimistic sales budget may result in

Budgeting and long-range planning are two terms that describe the same process.

Accounting in Action

The Recording Process

Adjusting the Accounts

Completing the Accounting Cycle

Accounting for Merchandising Operations

Inventories

Accounting Information Systems

Fraud, Internal Control, and Cash

Accounting for Receivables

Plant Assets, Natural Resources, and Intangible Assets

Current Liabilities and Payroll Accounting

Accounting for Partnerships

Corporations: Organization and Capital Stock Transactions

Corporations: Dividends, Retained Earnings, and Income Reporting

Long-Term Liabilities

Investments

Statement of Cash Flows

Financial Statement Analysis

Managerial Accounting

Job Order Costing

Process Costing

Cost-Volume-Profit

Budgetary Control and Responsibility Accounting

Standard Costs and Balanced Scorecard

Incremental Analysis and Capital Budgeting

Time Value of Money

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