Question 1

Which of the following is an example of the coordination and communication function of a budget?

Accepted Answer

A)  A budget demands integrated input from different business units and functions. 
B)  Employees are motivated to achieve the goals set by the budget. 
C)  Budget figures are used to evaluate the performance of managers. 
D)  The budget outlines a specific course of action for the coming period. 
A)  A budget demands integrated input from different business units and functions. 
B)  Employees are motivated to achieve the goals set by the budget. 
C)  Budget figures are used to evaluate the performance of managers. 
D)  The budget outlines a specific course of action for the coming period.

Question 2

Budgets are compared to actual results in order to incorporate better informed business strategies into their future planning decisions.

Accepted Answer

A) True 
 B)False

Question 3

AAA Company is preparing its 3rd quarter budget and provides the following data:
$\begin{array}{|l|r|r|r|} 
\hline& \text { Jul } & \text { Aug } & \text { Sep } \
\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \
\hline \text { Cash payments: } & & & \\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \
\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \
\hline \text { Capital expenditures } & 13,000 & 25,000 & 0\
\hline
\end{array}$
Cash balance at June 30 is projected to be $4,000. The company is required to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
-
What amount of principal should the company repay to the bank at the end of September?

Accepted Answer

A)  $5,000 
B)  $10,000 
C)  $15,000 
D)  $20,000 
A)  $5,000 
B)  $10,000 
C)  $15,000 
D)  $20,000

Question 4

In preparing an operating budget, the sales budget is prepared first. Which of the following is the last component of the operating budget?

Accepted Answer

A)  Capital expenditures 
B)  Budgeted income statement 
C)  Operating expenses 
D)  Inventory, purchases and cost of goods sold 
A)  Capital expenditures 
B)  Budgeted income statement 
C)  Operating expenses 
D)  Inventory, purchases and cost of goods sold

Question 5

Purchases for May were $100,000, while expected purchases for June and July are $110,000 and $125,000, respectively. All purchases are paid 25% in the month of purchase and 75% the following month. At what amount are June payments for purchases budgeted?

Accepted Answer

A)  $102,500 
B)  $107,500 
C)  $110,000 
D)  $121,250 
A)  $102,500 
B)  $107,500 
C)  $110,000 
D)  $121,250

Question 6

Which of the following statements is TRUE about the capital expenditures budget?

Accepted Answer

A)  It is a part of the financial budget. 
B)  It must be completed before the budgeted income statement is prepared. 
C)  It includes the sales budget. 
D)  It must be completed before the cash budget can be prepared. 
A)  It is a part of the financial budget. 
B)  It must be completed before the budgeted income statement is prepared. 
C)  It includes the sales budget. 
D)  It must be completed before the cash budget can be prepared.

Question 7

A department store has budgeted cost of sales of $36,000 for its men's suits in March. Management also wants to have $15,000 of men's suits in inventory at the end of March to prepare for the summer season. Beginning inventory of men's suits for March is expected to be $9,000. What dollar amount of men's suits should be purchased in March?

Accepted Answer

A)  $42,000 
B)  $45,000 
C)  $51,000 
D)  $60,000 
A)  $42,000 
B)  $45,000 
C)  $51,000 
D)  $60,000

Question 8

The budgeted cash collections for the current month typically take into consideration collections pertaining to credit sales of prior months.

Accepted Answer

A) True 
 B)False

Question 9

Pentangle Company has prepared a preliminary cash budget for the 3S1U1P1rdS1S1P0 quarter as shown below:
$\begin{array}{|l|r|r|r|}
\hline\text { Cash Burdget } & \text { Jul } & \text { Aug } & \text { Sep } \
\hline \text { Beginning cash balance } & \$ 32,000 & \$ 4,400 & \$ 6,900 \
\hline\text { Cash collections } & 49,400 & 51,000 & 44,600 \
\hline \text { Cash available } & 81,400 & 55,400 & 51,500 \
\hline\text { Cash payments: }\
\hline \text { Purchases of inventory } & 36,000 & 9,000 & 11,000 \
\hline \text { Operating expenses } & 41,000 & 30,500 & 30,900 \
\hline \text { Capital expenditures } & 0 & 9,000 & 7,700 \
\hline \text { Total cash payments } & \$ 77,000 & \$ 48,500 & \$ 49,600 \
\hline \text { Ending cash balance } & \$ 4,400 & \$ 6,900 & \$ 1,900 \
\hline
\end{array}$

Subsequently, the marketing department revised its figures for cash collections. New data are as follows: $52,000 in July, $50,000 in August, and $42,000 in September.
- Based on the new data, what is the new projected cash balance at the end of August?

Accepted Answer

A)  $8,500 
B)  $2,400 
C)  $7,000 
D)  $900 
A)  $8,500 
B)  $2,400 
C)  $7,000 
D)  $900

Question 10

The financial budget includes all of the following EXCEPT the:

Accepted Answer

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

Question 11

Liam O'Connor is responsible for managing the residential construction division of a large diversified real estate development company. Liam's business unit would most accurately be described as a(n):

Accepted Answer

A)  cost center. 
B)  revenue center. 
C)  profit center. 
D)  investment center. 
A)  cost center. 
B)  revenue center. 
C)  profit center. 
D)  investment center.

Question 12

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts payable, which document should be used?

Accepted Answer

A)  Inventory, purchases and cost of goods sold budget 
B)  Budgeted cash payments for purchases 
C)  Cash budget 
D)  Operating expenses budget 
A)  Inventory, purchases and cost of goods sold budget 
B)  Budgeted cash payments for purchases 
C)  Cash budget 
D)  Operating expenses budget

Question 13

Which of the following describes the sales budget?

Accepted Answer

A)  It aids in planning to ensure the company has adequate inventory on hand. 
B)  It captures the variable and fixed expenses of the business. 
C)  It depicts the breakdown of sales based on terms of collection. 
D)  It helps in planning to ensure the business has adequate cash. 
A)  It aids in planning to ensure the company has adequate inventory on hand. 
B)  It captures the variable and fixed expenses of the business. 
C)  It depicts the breakdown of sales based on terms of collection. 
D)  It helps in planning to ensure the business has adequate cash.

Question 14

Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions-Construction, Manufacturing, and Military. The total monthly costs
Of the procurement department are $480,000. Of these costs, 80% are traceable to the divisions, and 20% are considered untraceable. Henderson has decided to assign the traceable costs to the divisions based on number of purchase orders processed. Below is a list of the purchase orders per division.
$$\begin{array} { | l | r | } 
\hline \text { Divisions } & \text { Purchase Orders } \
\hline \text { Construction } & 3,200 \
\hline \text { Manufacturing } & 2,400 \
\hline \text { Military } & 800 \
\hline \text { Total } & 6,400 \
\hline
\end{array}$$
-
Before assigning the traceable costs to the division, Henderson needs to calculate a cost per purchase order. That amount should be:

Accepted Answer

A)  $56 per purchase order. 
B)  $60 per purchase order. 
C)  $75 per purchase order. 
D)  $82 per purchase order. 
A)  $56 per purchase order. 
B)  $60 per purchase order. 
C)  $75 per purchase order. 
D)  $82 per purchase order.

Question 15

Which of the following BEST describes a business unit where the manager is primarily responsible for generating sales revenue?

Accepted Answer

A)  Profit center 
B)  Investment center 
C)  Revenue center 
D)  Cost center 
A)  Profit center 
B)  Investment center 
C)  Revenue center 
D)  Cost center

Question 16

Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions-Construction, Manufacturing, and Military. The Construction Division has been allocated a total of $192,000 of costs from the procurement department. Of that amount, $144,000 is considered traceable to the three product types within the division-Civil Construction, Residential Construction, and Commercial Construction. The traceable amounts are further allocated to the three product types within the division as shown here: $\text { Construction Division }$
$\begin{array}{|l|r|r|r|}
\hline\text { Product lines } & \text { Revenues } & \text { Variable } & \text { Assigned Costs }\
&&\text { Expenses }\
\hline \text { Civil } & \$ 36,000 & \$ 24,000 & \$ 20,250 \
\hline \text { Residential } & \$ 98,000 & \$ 41,000 & \$ 40,500 \
\hline \text { Commerdal } & \$ 216,000 & \$ 60,000 & \$ 83,250 \
\hline \text { Total } & \$ 350,000 & \$ 125,000 & \$ 144,000 \
\hline
\end{array}$
 
-The above information is used to complete a performance report, the divisional income statement, for the Construction Division. On that report, the divisional segment margin for the whole Construction Division, including all relevant costs, is:

Accepted Answer

A)  $81,000. 
B)  $33,000. 
C)  $48,000. 
D)  ($15,000). 
A)  $81,000. 
B)  $33,000. 
C)  $48,000. 
D)  ($15,000).

Question 17

Beta Company is now preparing their budget for the 2nd quarter. The following data is provided:
$\begin{array}{|l|r|r|r|}
\hline \text { Sales Budget } & \text { Apr } & \text { May } & \text { Jun } \
\hline \text { Cash sales } & \$ 32,000 & \$ 36,000 & \$ 42,000 \
\hline \text { Credit sales } & 40,000 & 50,000 & 54,000 \
\hline \text { Total sales } & \$ 72,000 & \$ 86,000 & \$ 96,000 \
\hline\
\hline\text { Budgeted Cash Collections }& \text { Apr } & \text { May } & \text { Jun }\ 
\hline \text { Cash sales collected in month of sale } & \$ 32,000 & \$ 36,000 & \$ 42,000 \
\hline \text { Credit sales -20\% collected in current month } & 8,000 & 10,000 & 10,800 \
\hline \text { Credit sales - } 80 \% \text { collected from previous } & & & \
\text { month } & 29,000 & 32,000 & 40,000 \
\hline \text { Total collections } & \$ 69,000 & \$ 78,000 & \$ 92,800 \
\hline
\end{array}$
 
For the budgeted balance sheet at June 30, what amount should be shown for Accounts receivable?

Accepted Answer

A)  $43,200 
B)  $54,000 
C)  $96,000 
D)  $40,000 
A)  $43,200 
B)  $54,000 
C)  $96,000 
D)  $40,000

Question 18

Henderson Industrial Products uses a centralized service department for procurement of raw materials, servicing all three of its divisions Construction, Manufacturing, and Military. The total monthly costs of the procurement department are $480,000. Of these costs, 80% are traceable to the divisions, and 20% are considered untraceable. Henderson has decided to assign the traceable costs to the divisions based on number of purchase orders processed. Below is a list of the purchase orders per division.
 $$\begin{array} { | l | r | } 
\hline \text { Divisions } & \text { Purchase Orders } \
\hline \text { Construction } & 3,200 \
\hline \text { Manufacturing } & 2,400 \
\hline \text { Military } & 800 \
\hline \text { Total } & 6,400 \
\hline
\end{array}$$ 
When Henderson calculates a rate per purchase order, that rate should be calculated on the basis of the full cost of the procurement department.

Accepted Answer

A) True 
 B)False

Question 19

AAA Company is preparing its 3rd quarter budget and provides the following data:
$\begin{array}{|l|r|r|r|} 
\hline& \text { Jul } & \text { Aug } & \text { Sep } \
\hline \text { Cash collections } & \$ 50,000 & \$ 40,000 & \$ 48,000 \
\hline \text { Cash payments: } & & & \\hline \text { Purchases of inventory } & 31,000 & 22,000 & 18,000 \
\hline \text { Operating expenses } & 12,000 & 9,000 & 11,600 \
\hline \text { Capital expenditures } & 13,000 & 25,000 & 0\
\hline
\end{array}$
Cash balance at June 30 is projected to be $4,000. The company is required to maintain a minimum cash balance of $5,000 and is authorized to borrow at the end of each month to make up any shortfalls. It may borrow in increments of $5,000 and pays interest monthly at an annual rate of 5%. All financing transactions are assumed to take place at the end of the month. Loan balance should be repaid in increments of $5,000 when there is surplus cash.
-
What is the budgeted cash balance at the end of July, after required financing transactions?

Accepted Answer

A)  $0 
B)  $5,000 
C)  $3.000 
D)  $8,000 
A)  $0 
B)  $5,000 
C)  $3.000 
D)  $8,000

Question 20

Budgeting is a technique that is used to plan for future cash inflows and outflows.

Accepted Answer

A) True 
 B)False

Which of the following is an example of the coordination and communication function of a budget?

Budgets are compared to actual results in order to incorporate better informed business strategies into their future planning decisions.

In preparing an operating budget, the sales budget is prepared first. Which of the following is the last component of the operating budget?

Purchases for May were $100,000, while expected purchases for June and July are $110,000 and $125,000, respectively. All purchases are paid 25% in the month of purchase and 75% the following month. At what amount are June payments for purchases budgeted?

Which of the following statements is TRUE about the capital expenditures budget?

The budgeted cash collections for the current month typically take into consideration collections pertaining to credit sales of prior months.

The financial budget includes all of the following EXCEPT the:

Liam O'Connor is responsible for managing the residential construction division of a large diversified real estate development company. Liam's business unit would most accurately be described as a(n):

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts payable, which document should be used?

Which of the following describes the sales budget?

Which of the following BEST describes a business unit where the manager is primarily responsible for generating sales revenue?

Budgeting is a technique that is used to plan for future cash inflows and outflows.

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters

Exam 22: The Master Budget and Responsibility Accounting

Which of the following is an example of the coordination and communication function of a budget?

Budgets are compared to actual results in order to incorporate better informed business strategies into their future planning decisions.

In preparing an operating budget, the sales budget is prepared first. Which of the following is the last component of the operating budget?

Purchases for May were $100,000, while expected purchases for June and July are $110,000 and $125,000, respectively. All purchases are paid 25% in the month of purchase and 75% the following month. At what amount are June payments for purchases budgeted?

Which of the following statements is TRUE about the capital expenditures budget?

The budgeted cash collections for the current month typically take into consideration collections pertaining to credit sales of prior months.

The financial budget includes all of the following EXCEPT the:

Liam O'Connor is responsible for managing the residential construction division of a large diversified real estate development company. Liam's business unit would most accurately be described as a(n):

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet. To provide the balance for Accounts payable, which document should be used?

Which of the following describes the sales budget?

Which of the following BEST describes a business unit where the manager is primarily responsible for generating sales revenue?

Budgeting is a technique that is used to plan for future cash inflows and outflows.

Corporations: Paid-In Capital and the Balance Sheet

Corporations: Effects on Retained Earnings and the Income Statement

The Statement of Cash Flows

Financial Statement Analysis

Introduction to Management Accounting

Job Order and Process Costing

Activity-Based Costing and Other Cost Management Tools

Cost-Volume-Profit Analysis

Short-Term Business Decisions

Capital Investment Decisions and the Time Value of Money

Flexible Budgets and Standard Costs

Performance Evaluation and the Balanced Scorecard

Filters