Question 1

Effective budgeting requires clearly defined lines of authority and responsibility.

Accepted Answer

A) True 
 B)False

Question 2

The cash budget reflects

Accepted Answer

A)  all revenues and all expenses for a period. 
B)  expected cash receipts and cash disbursements from all sources. 
C)  all the items that appear on a budgeted income statement. 
D)  all the items that appear on a budgeted balance sheet. 
A)  all revenues and all expenses for a period. 
B)  expected cash receipts and cash disbursements from all sources. 
C)  all the items that appear on a budgeted income statement. 
D)  all the items that appear on a budgeted balance sheet.

Question 3

Correy Inc. reported the following information for 2016: $\begin{array}{llll}
&\text { October }&\text { November } & \text { December }\
\text { Budgeted sales } & \$ 460,000 & \$ 440,000 & \$ 540,000 \
\text { Budgeted purchases } & \$ 240,000 & \$ 256,000 & \$ 288,000
\end{array}$ All sales are on credit.
$\bullet$Customer amounts on account are collected 50% in the month of sale and 50% in the following month.
$\bullet$Cost of goods sold is 35% of sales.
$\bullet$Correy purchases and pays for merchandise 60% in the month of acquisition and 40% in the following month.
$\bullet$Accounts payable is used only for inventory acquisitions.
How much cash will Correy receive during November?

Accepted Answer

A)  $220000 
B)  $490000 
C)  $450000 
D)  $440000 
A)  $220000 
B)  $490000 
C)  $450000 
D)  $440000

Question 4

Walt Bach Company has accumulated the following budget data for the year 2016.
1. Sales: 40000 units unit selling price $50.
2. Cost of one unit of finished goods: Direct materials 2 pounds at $5 per pound direct labor 1.5 hours at $12 per hour and manufacturing overhead $6 per direct labor hour.
3. Inventories (raw materials only): Beginning 10000 pounds; ending 15000 pounds.
4. Raw materials cost: $5 per pound.
5. Selling and administrative expenses: $200000.
6. Income taxes: 30% of income before income taxes.
Instructions
(a) Prepare a schedule showing the computation of cost of goods sold for 2016.
(b) Prepare a budgeted income statement for 2016.

Accepted Answer

The answer of Walt Bach Company has accumulated the following...

Question 5

Budgeting in not-for-profit organizations

Accepted Answer

A)  is not important because they are not profit-oriented. 
B)  usually starts with budgeting expenditures rather than receipts. 
C)  is necessary only if some product is produced and sold. 
D)  consists entirely of budgeted contributions. 
A)  is not important because they are not profit-oriented. 
B)  usually starts with budgeting expenditures rather than receipts. 
C)  is necessary only if some product is produced and sold. 
D)  consists entirely of budgeted contributions.

Question 6

Burr Inc. provided the following information:

$\begin{array}{lll}
&\text { July } & \text { August }\
\text { Projected sales } & \$ 220,000 & \$ 260,000 \
\text { Projected merchandise purchases } & \$ 150,000 & \$ 180,000
\end{array}$ Burr estimates that it will collect 40% of its sales in the month of sale 35% in the month after the sale and 22% in the second month following the sale. Three percent of all sales are estimated to be bad debts.
$\bullet$Burr pays 30% of merchandise purchases in the month purchased and 70% in the following month.
$\bullet$General operating expenses are budgeted to be $20000 per month of which depreciation is $2000 of this amount. Burr pays operating expenses in the month incurred.
$\bullet$Burr makes loan payments of $3000 per month of which $400 is interest and the remainder is principal.
Instructions
Calculate Burr's budgeted cash disbursements for August.

Accepted Answer

None

Question 7

The master budget reflects management's long-term plans encompassing five years or more.

Accepted Answer

A) True 
 B)False

Question 8

Coordinating the preparation of the budget is the responsibility of the

Accepted Answer

A)  treasurer. 
B)  president. 
C)  chief accountant. 
D)  budget committee. 
A)  treasurer. 
B)  president. 
C)  chief accountant. 
D)  budget committee.

Question 9

Which of the following items does not follow from the adoption of a budget?

Accepted Answer

A)  Promote efficiency 
B)  Deterrent to waste 
C)  Basis for performance evaluation 
D)  Guarantee of accomplishing the profit objective 
A)  Promote efficiency 
B)  Deterrent to waste 
C)  Basis for performance evaluation 
D)  Guarantee of accomplishing the profit objective

Question 10

Which one of the following is not a benefit of budgeting?

Accepted Answer

A)  It facilitates the coordination of activities. 
B)  It provides definite objectives for evaluating performance. 
C)  It provides assurance that the company will achieve its objectives. 
D)  It requires all levels of management to plan ahead on a recurring basis. 
A)  It facilitates the coordination of activities. 
B)  It provides definite objectives for evaluating performance. 
C)  It provides assurance that the company will achieve its objectives. 
D)  It requires all levels of management to plan ahead on a recurring basis.

Question 11

For a merchandiser the starting point in the development of the master budget is the

Accepted Answer

A)  cash budget. 
B)  sales budget. 
C)  selling and administrative expenses budget. 
D)  budgeted income statement. 
A)  cash budget. 
B)  sales budget. 
C)  selling and administrative expenses budget. 
D)  budgeted income statement.

Question 12

Which of the following expenses would not appear on a selling and administrative expense budget?

Accepted Answer

A)  Sales commissions 
B)  Depreciation 
C)  Property taxes 
D)  Indirect labor 
A)  Sales commissions 
B)  Depreciation 
C)  Property taxes 
D)  Indirect labor

Question 13

Casa Development Inc. has budgeted sales revenues as follows: $$\begin{array} { l c } 
& \text { Budgeted Sales Revenues } \
\text { January } & \$ 55,000 \
\text { February } & 75,000 \
\text { March } & 90,000 \
\text { April } & 80,000 \
\text { May } & 60,000 \
\text { June } & 35,000
\end{array}$$ Past experience has indicated that 80% of sales each month are on credit and that collection of credit sales occurs as follows: 60% in the month of sale 30% in the month following the sale and 5% in the second month following the sale. The other 5% is uncollectible.
Instructions
Prepare a schedule which shows expected cash receipts from sales for the months of April May and June.

Accepted Answer

The answer of Casa Development Inc. has budgeted sales revenues...

Question 14

It is important that budgets be accepted by

Accepted Answer

A)  division managers only. 
B)  department heads only. 
C)  supervisors only. 
D)  All of these answers are correct. 
A)  division managers only. 
B)  department heads only. 
C)  supervisors only. 
D)  All of these answers are correct.

Question 15

A well-developed budget can operate and enforce itself.

Accepted Answer

A) True 
 B)False

Question 16

The budget components for Birk Company for the quarter ended June 30 appear below. Birk sells trash cans for $12 each. Budgeted production for the next three months is: $$\begin{array} { l l } 
\text { April } & 26,000 \text { units } \
\text { May } & 46,000 \text { units } \
\text { June } & 29,000 \text { units }
\end{array}$$ Birk desires to have trash cans on hand at the end of each month equal to 20 percent of the following month's budgeted sales in units. On March 31 Birk had 4000 completed units on hand. Five pounds of plastic are required for each trash can. At the end of each month Birk desires to have 10 percent of the following month's production material needs on hand. At March 31 Birk had 13000 pounds of plastic on hand. The materials used in production costs $0.60 per pound. Each trash can produced requires 0.10 hours of direct labor.
Instructions
Compute the cost of the plastic inventory at the end of May.

Accepted Answer

Cost of ending inven

Question 17

The primary benefits of budgeting include all of the following except it

Accepted Answer

A)  requires only top management to plan ahead and formalize their future goals. 
B)  provides definite objectives for evaluating performance. 
C)  creates an early warning system for potential problems. 
D)  motivates personnel throughout the organization. 
A)  requires only top management to plan ahead and formalize their future goals. 
B)  provides definite objectives for evaluating performance. 
C)  creates an early warning system for potential problems. 
D)  motivates personnel throughout the organization.

Question 18

Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable?

Accepted Answer

A)  Department managers should be held accountable for all variances from budgets for their departments. 
B)  Department managers should only be held accountable for controllable variances for their departments. 
C)  Department managers should be credited for favorable variances even if they are beyond their control. 
D)  Department managers' performances should not be evaluated based on actual results to budgeted results. 
A)  Department managers should be held accountable for all variances from budgets for their departments. 
B)  Department managers should only be held accountable for controllable variances for their departments. 
C)  Department managers should be credited for favorable variances even if they are beyond their control. 
D)  Department managers' performances should not be evaluated based on actual results to budgeted results.

Question 19

Pell Manufacturing is preparing its direct labor budget for May. Projections for the month are that 33400 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $12 what is the total budgeted direct labor cost for May?

Accepted Answer

A)  1159200. 
B)  1180800. 
C)  1202400. 
D)  1296000. 
A)  1159200. 
B)  1180800. 
C)  1202400. 
D)  1296000.

Question 20

Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities will prepare?

Accepted Answer

A)  Orange Co. will prepare a production budget and Pineapple Company will prepare a merchandise purchases budget. 
B)  Orange Co. will prepare a sales forecast and Pineapple Company will prepare a sales budget. 
C)  Pineapple Company will prepare a production budget and Orange Co. will prepare a merchandise purchases budget. 
D)  Both companies will prepare the same types of budgets. 
A)  Orange Co. will prepare a production budget and Pineapple Company will prepare a merchandise purchases budget. 
B)  Orange Co. will prepare a sales forecast and Pineapple Company will prepare a sales budget. 
C)  Pineapple Company will prepare a production budget and Orange Co. will prepare a merchandise purchases budget. 
D)  Both companies will prepare the same types of budgets.

Exam 23: Budgetary Planning

Effective budgeting requires clearly defined lines of authority and responsibility.

The cash budget reflects

Budgeting in not-for-profit organizations

The master budget reflects management's long-term plans encompassing five years or more.

Coordinating the preparation of the budget is the responsibility of the

Which of the following items does not follow from the adoption of a budget?

Which one of the following is not a benefit of budgeting?

For a merchandiser the starting point in the development of the master budget is the

Which of the following expenses would not appear on a selling and administrative expense budget?

It is important that budgets be accepted by

A well-developed budget can operate and enforce itself.

The primary benefits of budgeting include all of the following except it

Top management notices a variation from budget and an investigation of the difference reveals that the department manager could not be expected to have controlled the variation. Which of the following statements is applicable?

Pell Manufacturing is preparing its direct labor budget for May. Projections for the month are that 33400 units are to be produced and that direct labor time is three hours per unit. If the labor cost per hour is $12 what is the total budgeted direct labor cost for May?

Orange Co. is a manufacturer and Pineapple Company is a merchandiser. What is the difference in the budgets the two entities will prepare?

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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