Question 1

The marketing department is primarily responsible for establishing the sales forecast.

Accepted Answer

A) True 
 B)False

Question 2

If a budgeting system is designed correctly,top management will not have to get involved in the process.

Accepted Answer

A) True 
 B)False

Question 3

Select the incorrect statement about budgeting committees.

Accepted Answer

A)  Membership on the budget committee is restricted most often to accountants because the budget involves numbers. 
B)  Budget committees usually have responsibility for the coordination of budgeting activities. 
C)  The budget committee is responsible for settling disputes between various departments over budget matters. 
D)  One of the responsibilities of the budget committee is to monitor the organization's progress toward achieving its budget standards. 
A)  Membership on the budget committee is restricted most often to accountants because the budget involves numbers. 
B)  Budget committees usually have responsibility for the coordination of budgeting activities. 
C)  The budget committee is responsible for settling disputes between various departments over budget matters. 
D)  One of the responsibilities of the budget committee is to monitor the organization's progress toward achieving its budget standards.

Question 4

Spacely Sprockets' sales budget shows the following expected total sales: $\begin{array}{|l|l|}
\hline \text { Month } & \text { Sales } \
\hline \text { Jamuary } & \$ 30,000 \
\hline \text { February } & \$ 40,000 \
\hline \text { March } & \$ 35,000 \
\hline \text { Apnil } & \$ 30,000 \
\hline
\end{array}$ The company expects 80% of its sales to be on account (credit sales).Credit sales are collected as follows: 30% in the month of sale,68% in the month following the sale with the remainder being uncollectible and written off in the month following the sale.
Required:
a)Calculate budgeted accounts receivable at the end of each month from February through April.
b)Calculate budgeted cash inflows from collection of receivables for each month from February through April.

Accepted Answer

Answers will vary
1)Working Calculations

Question 5

Select the correct statement about the master budget.

Accepted Answer

A)  The master budget is a group of detailed budgets and schedules representing the company's operating and financial plans for the past accounting period. 
B)  The master budget usually includes operating budgets and capital budgets,and pro forma financial statements. 
C)  The budgeting process usually begins with preparing the strategic budgets. 
D)  Preparing the master budget begins with the cash budget. 
A)  The master budget is a group of detailed budgets and schedules representing the company's operating and financial plans for the past accounting period. 
B)  The master budget usually includes operating budgets and capital budgets,and pro forma financial statements. 
C)  The budgeting process usually begins with preparing the strategic budgets. 
D)  Preparing the master budget begins with the cash budget.

Question 6

The inventory purchases budget is based on which budget?

Accepted Answer

A)  Cash budget 
B)  Sales budget 
C)  Selling and administrative expense budget 
D)  None of the above answers are correct. 
A)  Cash budget 
B)  Sales budget 
C)  Selling and administrative expense budget 
D)  None of the above answers are correct.

Question 7

Budgeted sales commissions would appear on the:

Accepted Answer

A)  selling,general and administrative budget and pro forma income statement 
B)  selling,general and administrative budget and pro forma balance sheet 
C)  sales budget and pro forma balance sheet 
D)  sales budget and pro forma income statement 
A)  selling,general and administrative budget and pro forma income statement 
B)  selling,general and administrative budget and pro forma balance sheet 
C)  sales budget and pro forma balance sheet 
D)  sales budget and pro forma income statement

Question 8

The budgeting process formalizes and documents managerial plans to clearly communicating objectives to both superiors and subordinates.This budgeting requirement is an example of:

Accepted Answer

A)  performance measurement. 
B)  planning. 
C)  budget coordination. 
D)  taking corrective action. 
A)  performance measurement. 
B)  planning. 
C)  budget coordination. 
D)  taking corrective action.

Question 9

Which of the following is a benefit of participative budgeting?

Accepted Answer

A)  Employees tend to be more motivated to achieve the budget. 
B)  A twelve-month planning horizon is maintained at all times. 
C)  Budget planning is highly centralized. 
D)  Communication is clearer because it flows in only one direction - upwarD. 
A)  Employees tend to be more motivated to achieve the budget. 
B)  A twelve-month planning horizon is maintained at all times. 
C)  Budget planning is highly centralized. 
D)  Communication is clearer because it flows in only one direction - upwarD.

Question 10

Which of the following items would be least useful in preparing a schedule of cash receipts?

Accepted Answer

A)  Expected revenue from cash sales. 
B)  Number of units expected to be purchased. 
C)  Service charges for credit card sales. 
D)  Past accounts receivable collection experience. 
A)  Expected revenue from cash sales. 
B)  Number of units expected to be purchased. 
C)  Service charges for credit card sales. 
D)  Past accounts receivable collection experience.

Question 11

When a company's district managers submitted their preliminary budget proposals,top management discovered that the southern district manager had requested a new project management information system.Unfortunately,the system is incompatible with the system used at headquarters.Which of the following advantages of budgeting reduces the likelihood that the company will end up with two incompatible systems?

Accepted Answer

A)  Planning 
B)  Coordination 
C)  Performance measurement 
D)  Corrective measures 
A)  Planning 
B)  Coordination 
C)  Performance measurement 
D)  Corrective measures

Question 12

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

Accepted Answer

A)  Expected unit selling price 
B)  Beginning inventory 
C)  Expected unit sales 
D)  Desired ending inventory 
A)  Expected unit selling price 
B)  Beginning inventory 
C)  Expected unit sales 
D)  Desired ending inventory

Question 13

The Game Zone sells computer and other electronic games.The store has budgeted sales for January Year 2 as indicated in the following table.The company expects a 4 percent increase in sales for the month of February and a 3 percent increase for March. $\begin{array}{|l|r|c|c|}
\hline \text {Sales }& \text { January } & \text { February } & \text { March } \
\hline  \text {Cash sales }&\$\quad40,000 & ? & ? \
\hline  \text {Sales on account }&\underline {\$\quad80,000} & ? & ? \
\hline  \text {Total budgeted sales}& \$\quad120,000 & ? & ? \
\hline
\end{array}$ Required:
(a)Complete the sales budget by filling in the missing amounts.
(b)What is the amount of sales revenue the company will report on its pro forma income statement for the first quarter?

Accepted Answer

Answers will vary
(a)   (b)Tot

Question 14

Which of the following items is not needed to prepare a sales budget by product line?

Accepted Answer

A)  Expected purchase price of each product. 
B)  Expected unit sales of each product. 
C)  Expected selling price of each product. 
D)  All of the answers are correct. 
A)  Expected purchase price of each product. 
B)  Expected unit sales of each product. 
C)  Expected selling price of each product. 
D)  All of the answers are correct.

Question 15

Tableware Unlimited Company plans to sell china and other dining-related items over the internet.The company plans to begin business on January 1,Year 1.The company's accountant has prepared the following sales budget for the first quarter of Year 1:
 $\begin{array}{c}
\begin{array}{|l|}
\hline\
\hline\
\text { Budgeted Sales }\
\hline
\end{array}
\begin{array}{c|}
\hline\text {January}\
\hline\
\$ \quad 200,000 \
\hline
\end{array}
\begin{array}{c|}
\hline\text {February}\
\hline\
 \$ \quad 250,000\
\hline
\end{array}
\begin{array}{c|}
\hline\text {March}\
\hline\
 \$ \quad 300,000\
\hline
\end{array}
\begin{array}{c|}
\hline\text {First Quarter}\
\hline\
 \$ \quad 750,000 \
\hline
\end{array}
\end{array}$
 In anticipation of preparing a cash budget,the accountant needs to compute the expected monthly cash collections.Because the company is new and has no collection experience of its own,the accountant contacted an industry trade group and obtained the following industry collection data:
Collections on account:
70% in the month of sale
20% in the month following sale
6% in the second month following sale
Uncollectible accounts have averaged 4% of receivables.The company gives a 2% discount for payments made by customers during the month of sale.
Required:
Prepare a schedule of cash collections from sales by month and in total for the first quarter.

Accepted Answer

Answers will vary
Schedule of cash colle

Question 16

Select the correct statement.

Accepted Answer

A)  The four advantages of budgeting include planning,coordination,performance measurement,and reporting. 
B)  In a participative budgeting system,budget information flows in one direction only,from bottom to top. 
C)  The three major categories of the master budget are operating budgets,capital budgets,and pro forma financial statements. 
D)  The accounting department normally coordinates the development of the sales forecast. 
A)  The four advantages of budgeting include planning,coordination,performance measurement,and reporting. 
B)  In a participative budgeting system,budget information flows in one direction only,from bottom to top. 
C)  The three major categories of the master budget are operating budgets,capital budgets,and pro forma financial statements. 
D)  The accounting department normally coordinates the development of the sales forecast.

Question 17

Barnes Company expects to begin operating on January 1.The company's master budget contained the following operating expense budget: $$\begin{array} { | l | r | r | r | } 
\hline &  { \text { January } } & \text { February } &  { \text { March } } \
\hline \text { Salary expense } & \$ 36,000 & \$ 36,000 & \$ 36,000 \
\hline \text { Sales commissions, } 5 \% \text { of sales } & 30,000 & 32,000 & 24,000 \
\hline \text { Utilities } & 2,800 & 2,800 & 2,800 \
\hline \text { Depreciation on store equipment } & 1,000 & 1,000 & 1,000 \
\hline \text { Rent } & 7,200 & 7,200 & 7,200 \
\hline \text { Miscellane ous } & 1,800 & 1,800 & 1,800 \
\hline \text { Total operating expenses } & \$ 78,800 & \$ \quad 80,800 & 
 \$ 72,800 \
\hline
\end{array}$$  Sales commissions are paid in cash in the month following the month in which the expense is recognized.All other expense items requiring cash payment are paid in the month in which they are recognized.The amount of accumulated depreciation appearing on the company's March 31 pro forma balance sheet is:

Accepted Answer

A)  $1,000. 
B)  $2,000. 
C)  $3,000. 
D)  $12,000. 
A)  $1,000. 
B)  $2,000. 
C)  $3,000. 
D)  $12,000.

Question 18

Which of the following would not be included in a selling and administrative expenses budget?

Accepted Answer

A)  Budgeted salary expenses 
B)  Budgeted rent expense 
C)  Cash payments for selling and administrative expenses 
D)  Budgeted interest expense 
A)  Budgeted salary expenses 
B)  Budgeted rent expense 
C)  Cash payments for selling and administrative expenses 
D)  Budgeted interest expense

Question 19

Pro forma financial statements are prepared at the end of the year and are used to evaluate the performance of managers.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following budgets or schedules uses data contained in the selling and administrative expense budget?

Accepted Answer

A)  Cash receipts schedule 
B)  Cash payments schedule 
C)  Inventory purchases budget 
D)  Sales budget 
A)  Cash receipts schedule 
B)  Cash payments schedule 
C)  Inventory purchases budget 
D)  Sales budget

The marketing department is primarily responsible for establishing the sales forecast.

If a budgeting system is designed correctly,top management will not have to get involved in the process.

Select the incorrect statement about budgeting committees.

Select the correct statement about the master budget.

The inventory purchases budget is based on which budget?

Budgeted sales commissions would appear on the:

The budgeting process formalizes and documents managerial plans to clearly communicating objectives to both superiors and subordinates.This budgeting requirement is an example of:

Which of the following is a benefit of participative budgeting?

Which of the following items would be least useful in preparing a schedule of cash receipts?

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

Which of the following items is not needed to prepare a sales budget by product line?

Select the correct statement.

Which of the following would not be included in a selling and administrative expenses budget?

Pro forma financial statements are prepared at the end of the year and are used to evaluate the performance of managers.

Which of the following budgets or schedules uses data contained in the selling and administrative expense budget?

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters

Exam 7: Planning for Profit and Cost Control

The marketing department is primarily responsible for establishing the sales forecast.

If a budgeting system is designed correctly,top management will not have to get involved in the process.

Select the incorrect statement about budgeting committees.

Select the correct statement about the master budget.

The inventory purchases budget is based on which budget?

Budgeted sales commissions would appear on the:

The budgeting process formalizes and documents managerial plans to clearly communicating objectives to both superiors and subordinates.This budgeting requirement is an example of:

Which of the following is a benefit of participative budgeting?

Which of the following items would be least useful in preparing a schedule of cash receipts?

Which of the following items is not needed to prepare an inventory purchases budget for a merchandising business?

Which of the following items is not needed to prepare a sales budget by product line?

Select the correct statement.

Which of the following would not be included in a selling and administrative expenses budget?

Pro forma financial statements are prepared at the end of the year and are used to evaluate the performance of managers.

Which of the following budgets or schedules uses data contained in the selling and administrative expense budget?

Management Accounting and Corporate Governance

Cost Behavior, Operating Leverage, and Profitability Analysis

Analysis of Cost,Volume,and Pricing to Increase Profitability

Cost Accumulation,Tracing,and Allocation

Cost Management in an Automated Business Environment: ABC, ABM, and TQM

Relevant Information for Special Decisions

Performance Evaluation

Responsibility Accounting

Planning for Capital Investments

Product Costing in Service and Manufacturing Entities

Job-Order, Process, and Hybrid Costing Systems

Financial Statement Analysis

Statement of Cash Flows

Filters