Question 1

The master budget normally covers:

Accepted Answer

A)  Three months. 
B)  1 year. 
C)  1-5 years. 
D)  5-10 years. 
A)  Three months. 
B)  1 year. 
C)  1-5 years. 
D)  5-10 years.

Question 2

Vector Company seeks input from salespeople regarding the number of units they believe they can sell during the upcoming budget period. This is an example of participative budgeting.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following is a true statement?

Accepted Answer

A)  Pro forma financial statements are based on the company's budgets. 
B)  Companies prepare pro forma financial statements to show how their performance for the period will "look" if actual results match the budget. 
C)  Companies usually prepare a pro forma income statement, pro forma balance sheet, and pro forma statement of cash flows. 
D)  All of the answers are correct. 
A)  Pro forma financial statements are based on the company's budgets. 
B)  Companies prepare pro forma financial statements to show how their performance for the period will "look" if actual results match the budget. 
C)  Companies usually prepare a pro forma income statement, pro forma balance sheet, and pro forma statement of cash flows. 
D)  All of the answers are correct.

Question 4

The selling and administrative expense budget is prepared prior to the cash budget.

Accepted Answer

A) True 
 B)False

Question 5

Sentra Sporting Company sells tennis rackets and other sporting equipment. The purchasing department manager prepared the inventory purchases budget. Sentra's policy is to maintain an ending inventory balance equal to 15% of the following month's cost of goods sold. January's budgeted cost of goods sold is $70,000.   What is the amount of ending inventory that the company will report on its pro forma balance sheet?

Accepted Answer

A)  $7,500 
B)  $10,500 
C)  $35,300 
D)  $60,500 
A)  $7,500 
B)  $10,500 
C)  $35,300 
D)  $60,500

Question 6

Budgeting that involves decisions such as whether to buy or lease equipment or build a new factory is referred to as:

Accepted Answer

A)  capital budgeting. 
B)  operations budgeting. 
C)  facilities planning. 
D)  strategic planning. 
A)  capital budgeting. 
B)  operations budgeting. 
C)  facilities planning. 
D)  strategic planning.

Question 7

Expressing plans for a business in financial terms is commonly called:

Accepted Answer

A)  master planning. 
B)  budgeting. 
C)  strategic planning. 
D)  operational planning. 
A)  master planning. 
B)  budgeting. 
C)  strategic planning. 
D)  operational planning.

Question 8

Which of the following items will not appear on a cash budget?

Accepted Answer

A)  Expected cash collections 
B)  Expected cash payments 
C)  Expected credit sales 
D)  Financing activities 
A)  Expected cash collections 
B)  Expected cash payments 
C)  Expected credit sales 
D)  Financing activities

Question 9

The amount of cash paid for S&A expenses during the month of November is:

Accepted Answer

A)  $21,000 
B)  $22,200 
C)  $21,700 
D)  $23,200 
A)  $21,000 
B)  $22,200 
C)  $21,700 
D)  $23,200

Question 10

Compton Company expects the following total sales:   The company expects 60% of its sales to be credit sales and 40% for cash. Credit sales are collected as follows: 30% in the month of sale, 70% in the month following the sale. The budgeted accounts receivable balance on May 31 is:

Accepted Answer

A)  $12,240. 
B)  $12,600. 
C)  $20,400. 
D)  $21,000. 
A)  $12,240. 
B)  $12,600. 
C)  $20,400. 
D)  $21,000.

Question 11

The following budget information is available for the Arch Company for January Year 2:   All operating expenses are paid in cash in the month incurred. Compute total budgeted selling and administrative expenses (excluding interest) amount for January Year 2.

Accepted Answer

A)  $262,500 
B)  $283,000 
C)  $240,000 
D)  $285,800 
A)  $262,500 
B)  $283,000 
C)  $240,000 
D)  $285,800

Question 12

Which of the following statements is true?

Accepted Answer

A)  Participative budgeting means that a company's budget should be prepared by lower-level employees. 
B)  The attitudes and actions of upper-level management have little impact on the effectiveness of a company's budget. 
C)  Employees often find that budgets are constraining and limiting. 
D)  In preparing a budget, information flows occur only from the bottom up. 
A)  Participative budgeting means that a company's budget should be prepared by lower-level employees. 
B)  The attitudes and actions of upper-level management have little impact on the effectiveness of a company's budget. 
C)  Employees often find that budgets are constraining and limiting. 
D)  In preparing a budget, information flows occur only from the bottom up.

Question 13

Bright Minds Toy Company prepared the following sales budget for the second quarter. Projected sales for each of the first three months of operations are as follows:   Bright Minds expects to collect 70% of the sales on account in the month of sale, and 20% in the month following the sale, and the remainder in the second month following the sale.
What is the amount of sales revenue that the company will report on the second quarter pro forma income statement?

Accepted Answer

A)  $1,335,000 
B)  $1,129,800 
C)  $1,207,000 
D)  $1,001,800 
A)  $1,335,000 
B)  $1,129,800 
C)  $1,207,000 
D)  $1,001,800

Question 14

The master budget generally starts with a sales forecast.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following cash budget equations is incorrect?

Accepted Answer

A)  Cash payments + cash receipts = cash requirements 
B)  Beginning cash + cash receipts = total cash available 
C)  Cash payments + cash cushion = total cash needed 
D)  Period one ending cash balance = period two beginning cash balance 
A)  Cash payments + cash receipts = cash requirements 
B)  Beginning cash + cash receipts = total cash available 
C)  Cash payments + cash cushion = total cash needed 
D)  Period one ending cash balance = period two beginning cash balance

Question 16

Which of the following would not be included in the inventory purchases budget?

Accepted Answer

A)  Required purchases 
B)  Cash collections 
C)  Budgeted cost of goods sold 
D)  Desired ending inventory 
A)  Required purchases 
B)  Cash collections 
C)  Budgeted cost of goods sold 
D)  Desired ending inventory

Question 17

Budgeting that involves the development of a master budget to direct the firm's activities over the short-term is referred to as:

Accepted Answer

A)  capital budgeting. 
B)  operations budgeting. 
C)  strategic planning. 
D)  None of the choices. 
A)  capital budgeting. 
B)  operations budgeting. 
C)  strategic planning. 
D)  None of the choices.

Question 18

Select the incorrect statement regarding the human factor in the budgeting process.

Accepted Answer

A)  Budgets force employees to follow the organization's plan. 
B)  The evaluation feature of budget systems is frightening for many people. 
C)  There is a tendency for people to be uncomfortable with budgets. 
D)  Proper handling of human relations is essential to the establishment of an effective budget system. 
A)  Budgets force employees to follow the organization's plan. 
B)  The evaluation feature of budget systems is frightening for many people. 
C)  There is a tendency for people to be uncomfortable with budgets. 
D)  Proper handling of human relations is essential to the establishment of an effective budget system.

Question 19

Planning concerned with long-range decisions such as defining the scope of the business is referred to as:

Accepted Answer

A)  operations budgeting. 
B)  master planning. 
C)  capital budgeting. 
D)  strategic planning. 
A)  operations budgeting. 
B)  master planning. 
C)  capital budgeting. 
D)  strategic planning.

Question 20

Cheyenne Company has budgeted the following information for June:   If there is a cash shortage, the company borrows money from the bank. All cash is borrowed at the beginning of the month in $1,000 increments and interest is paid monthly at 1% on the first day of the following month. The company had no debt before June 1st. The amount of interest paid on July 1 would be:

Accepted Answer

A)  $250. 
B)  $400. 
C)  $221. 
D)  $290. 
A)  $250. 
B)  $400. 
C)  $221. 
D)  $290.

The master budget normally covers:

Vector Company seeks input from salespeople regarding the number of units they believe they can sell during the upcoming budget period. This is an example of participative budgeting.

Which of the following is a true statement?

The selling and administrative expense budget is prepared prior to the cash budget.

Budgeting that involves decisions such as whether to buy or lease equipment or build a new factory is referred to as:

Expressing plans for a business in financial terms is commonly called:

Which of the following items will not appear on a cash budget?

The amount of cash paid for S&A expenses during the month of November is:

Compton Company expects the following total sales: The company expects 60% of its sales to be credit sales and 40% for cash. Credit sales are collected as follows: 30% in the month of sale, 70% in the month following the sale. The budgeted accounts receivable balance on May 31 is:

The following budget information is available for the Arch Company for January Year 2: All operating expenses are paid in cash in the month incurred. Compute total budgeted selling and administrative expenses (excluding interest) amount for January Year 2.

Which of the following statements is true?

The master budget generally starts with a sales forecast.

Which of the following cash budget equations is incorrect?

Which of the following would not be included in the inventory purchases budget?

Budgeting that involves the development of a master budget to direct the firm's activities over the short-term is referred to as:

Select the incorrect statement regarding the human factor in the budgeting process.

Planning concerned with long-range decisions such as defining the scope of the business is referred to as:

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Performance Evaluation

Planning for Capital Investments

Filters

Exam 14: Planning for Profit and Cost Control

The master budget normally covers:

Vector Company seeks input from salespeople regarding the number of units they believe they can sell during the upcoming budget period. This is an example of participative budgeting.

Which of the following is a true statement?

The selling and administrative expense budget is prepared prior to the cash budget.

Budgeting that involves decisions such as whether to buy or lease equipment or build a new factory is referred to as:

Expressing plans for a business in financial terms is commonly called:

Which of the following items will not appear on a cash budget?

The amount of cash paid for S&A expenses during the month of November is:

Compton Company expects the following total sales: The company expects 60% of its sales to be credit sales and 40% for cash. Credit sales are collected as follows: 30% in the month of sale, 70% in the month following the sale. The budgeted accounts receivable balance on May 31 is:

The following budget information is available for the Arch Company for January Year 2: All operating expenses are paid in cash in the month incurred. Compute total budgeted selling and administrative expenses (excluding interest) amount for January Year 2.

Which of the following statements is true?

The master budget generally starts with a sales forecast.

Which of the following cash budget equations is incorrect?

Which of the following would not be included in the inventory purchases budget?

Budgeting that involves the development of a master budget to direct the firm's activities over the short-term is referred to as:

Select the incorrect statement regarding the human factor in the budgeting process.

Planning concerned with long-range decisions such as defining the scope of the business is referred to as:

An Introduction to Accounting

Accounting for Accruals and Deferrals

Accounting for Merchandising Businesses

Internal Controls, Accounting for Cash, and Ethics

Accounting for Receivables and Inventory Cost Flow

Accounting for Long-Term Operational Assets

Accounting for Liabilities

Proprietorships, Partnerships, and Corporations

Financial Statement Analysis

An Introduction to Management Accounting

Cost Behavior, Operating Leverage, and Profitability Analysis

Cost Accumulation, Tracing, and Allocation

Relevant Information for Special Decisions

Performance Evaluation

Planning for Capital Investments

Filters