Question 1

How is a master budget best described?

Accepted Answer

A) as a budget of the cash flows predicted for a future period of time. 
B) as the one and only budget that is of interest to management. 
C) as a summary of a number of interrelated budgets. 
D) as a budget for a manufacturing business. 
A) as a budget of the cash flows predicted for a future period of time. 
B) as the one and only budget that is of interest to management. 
C) as a summary of a number of interrelated budgets. 
D) as a budget for a manufacturing business.

Question 2

A budget system that always provides plans for a full 12 months into the future is known as:

Accepted Answer

A) advance budget. 
B) yearly budget. 
C) future budget. 
D) rolling budget. 
A) advance budget. 
B) yearly budget. 
C) future budget. 
D) rolling budget.

Question 3

What is the best description of the role of the budget committee?

Accepted Answer

A) supervising and taking responsibility for the budget setting process. 
B) predicting the budget. 
C) setting goals for individual departments. 
D) predicting the economic environment for the period. 
A) supervising and taking responsibility for the budget setting process. 
B) predicting the budget. 
C) setting goals for individual departments. 
D) predicting the economic environment for the period.

Question 4

If the opening balance of cash for one month is $20,000, cash receipts are estimated to be $398,000 and cash payments are estimated as $300,000, the opening cash balance at the beginning of the next month is:

Accepted Answer

A) $118,000. 
B) $109,000. 
C) $69,000. 
D) cannot be calculated. 
A) $118,000. 
B) $109,000. 
C) $69,000. 
D) cannot be calculated.

Question 5

The reconciliation between budgeted profit and actual profit can be summarised as:

Accepted Answer

A) budgeted profit minus all favourable variances plus all adverse variances equals actual profit. 
B) actual profit plus all favourable variances plus all adverse variances equals budgeted profit. 
C) actual profit plus all favourable variances minus all adverse variance equals budgeted profit. 
D) budgeted profit plus all favourable variances minus all adverse variance equals actual profit. 
A) budgeted profit minus all favourable variances plus all adverse variances equals actual profit. 
B) actual profit plus all favourable variances plus all adverse variances equals budgeted profit. 
C) actual profit plus all favourable variances minus all adverse variance equals budgeted profit. 
D) budgeted profit plus all favourable variances minus all adverse variance equals actual profit.

Question 6

Budgets are generally regarded as having several areas of usefulness. Which of these is not one of them?

Accepted Answer

A) They can facilitate control within the business. 
B) They tend to promote forward thinking. 
C) They help coordinate the various sectors of the business. 
D) They can be used to allocate direct expenses. 
A) They can facilitate control within the business. 
B) They tend to promote forward thinking. 
C) They help coordinate the various sectors of the business. 
D) They can be used to allocate direct expenses.

Question 7

If the principal objective of a firm is to enhance wealth, the most important budget target to meet is:

Accepted Answer

A) bank balance. 
B) sales. 
C) profit. 
D) production. 
A) bank balance. 
B) sales. 
C) profit. 
D) production.

Question 8

The change in the price of raw materials multiplied by the actual materials bought calculates which variance?

Accepted Answer

A) Materials price variance. 
B) Sales price variance. 
C) Materials usage variance. 
D) Labour price variance. 
A) Materials price variance. 
B) Sales price variance. 
C) Materials usage variance. 
D) Labour price variance.

Question 9

Use the information below to answer the following questions.
Crystal Computers owns a chain of seven shops selling computer goods. In the past the company maintained a healthy cash balance. However, this has fallen in recent months, and at the end of September 2018 it had an overdraft of $100,000. In view of this, its managing director has asked you to prepare a cash forecast for the next six months. You have collected the following information: $\begin{array}{lrrrrrr}&\text { Oct. } & \text { Nov. } & \text { Dec. } & \text { Jan. } & \text { Feb. } & \text {March } \
&\$ 000 & \$ 000 & \$ 000 & \$ 000 & \$ 000 & \$ 000\
\text { Cash Sales forecast } & 250 & 200 & 250 & 350 & 200 & 80 \
\text { Cash Purchases } & 180 & 160 & 130 & 40 & 50 & 60 \
\text { Wages and Salaries } & 40 & 40 & 50 & 40 & 40 & 45 \
\text { Rent } & & & 80 & & &\
\text { Rates } & & & & & & 60 \
\text { Other Expenses } & 25 & 25 & 25 & 25 & 25 & 25\
\text { Refurbishing Shops }&&&&&&{80} \
&245 & 225 & 285 & 185 & 115 & 190\
\end{array}$
-Which of these involve a projection of future cash receipts and cash disbursements?

Accepted Answer

A) Cash budget. 
B) Statement of comprehensive income. 
C) Statement of financial position. 
D) None of the above. 
A) Cash budget. 
B) Statement of comprehensive income. 
C) Statement of financial position. 
D) None of the above.

Question 10

When preparing its sales forecast, an organisation can use the 'bottom-up' approach. What is one of the features of this approach?

Accepted Answer

A) operating personnel are motivated to prepare realistic budgets and accept them as benchmarks in performance evaluation. 
B) multiple levels of managers and salespersons are involved in the forecasting process. 
C) it often involves negotiations between departments. 
D) all of the above. 
A) operating personnel are motivated to prepare realistic budgets and accept them as benchmarks in performance evaluation. 
B) multiple levels of managers and salespersons are involved in the forecasting process. 
C) it often involves negotiations between departments. 
D) all of the above.

Question 11

Budgets are said to be useful in promoting forward thinking and identification of short-term problems, because:

Accepted Answer

A) management can foresee future promotion opportunities. 
B) management can react to problem areas as they occur. 
C) potential problem areas can be identified early enough to allow management to explore ways of overcoming the problem. 
D) all of the above. 
A) management can foresee future promotion opportunities. 
B) management can react to problem areas as they occur. 
C) potential problem areas can be identified early enough to allow management to explore ways of overcoming the problem. 
D) all of the above.

Question 12

Where there is an insignificant adverse variance, management is best advised to:

Accepted Answer

A) ignore it, as the cost of investigation may outweigh the benefit. 
B) investigate immediately and in full detail. 
C) keep the variance under review. 
D) ignore it, as it may be compensated by an insignificant favourable variance. 
A) ignore it, as the cost of investigation may outweigh the benefit. 
B) investigate immediately and in full detail. 
C) keep the variance under review. 
D) ignore it, as it may be compensated by an insignificant favourable variance.

Question 13

Use the information below to answer the following questions.
Sales in December were $960,000. Projected sales for the first quarter of 2018 are: $$\begin{array} { l l } 
\text { January } & \$ 1,080,000 \
\text { February } & \$ 1,300,000 \
\text { March } & \$ 1,280,000
\end{array}$$ Sales are 20% cash and 80% on credit. Debtors pay in the month following the sale.
-Refer to the table above. Calculate total cash collected from sales for the month of March.

Accepted Answer

A) $1,296,000. 
B) $1,456,000. 
C) $1,216,000. 
D) $256,000. 
A) $1,296,000. 
B) $1,456,000. 
C) $1,216,000. 
D) $256,000.

Question 14

What variance does the difference between the actual cost of the direct labour hours worked and the planned cost of the direct labour hours measure?

Accepted Answer

A) The direct labour efficiency variance. 
B) The direct labour rate variance. 
C) The total direct labour variance. 
D) None of the above. 
A) The direct labour efficiency variance. 
B) The direct labour rate variance. 
C) The total direct labour variance. 
D) None of the above.

Question 15

Bluebird Ltd has provided the estimates below for the July-September quarter in 2017. $$\begin{array} { l r r r } 
& \text { July } & \text { August } & \text { September } \
& \$ & \$ & \$ \
\text { Sales } & 13,000 & 14,000 & 15,000 \
\text { Purchases } & 9,400 & 8,000 & 10,000 \
\text { Operating expenses } & 3,600 & 6,400 & 5,000
\end{array}$$ You are also given the following additional information:
• 35% of sales are cash sales, the remaining 65% credit sales are collected as follows:
o 30% in the month of sale
o 40% in the month after sale
o 28% 2 months after sale
o 2% lost in bad debts
• Sales in the months of May and June were $11,000 and $10,000 respectively.
• Operating expenses include depreciation each month of $900. All expenses and purchases are paid for in the same month they are incurred.
• The firm expects to sell some old machinery for $7,000 in August. New machinery worth $9,500 will be purchased in September.
• The cash balance on 1st July 2017 is $5,700.
REQUIRED:
a)Prepare a schedule of receipts from accounts receivable showing the collections in the three months July to September.
b)Prepare a cash budget for Bluebird Ltd for the three months July to September.

Accepted Answer

a)Accounts

Question 16

What does flexing the budget mean?

Accepted Answer

A) revising the budget sales figure to match actual sales. 
B) ignoring previously set targets. 
C) revising the budget to reflect changes in management behaviour. 
D) revising the original budget estimates to produce a budget based on the actual volume of activity. 
A) revising the budget sales figure to match actual sales. 
B) ignoring previously set targets. 
C) revising the budget to reflect changes in management behaviour. 
D) revising the original budget estimates to produce a budget based on the actual volume of activity.

How is a master budget best described?

A budget system that always provides plans for a full 12 months into the future is known as:

What is the best description of the role of the budget committee?

If the opening balance of cash for one month is $20,000, cash receipts are estimated to be $398,000 and cash payments are estimated as $300,000, the opening cash balance at the beginning of the next month is:

The reconciliation between budgeted profit and actual profit can be summarised as:

Budgets are generally regarded as having several areas of usefulness. Which of these is not one of them?

If the principal objective of a firm is to enhance wealth, the most important budget target to meet is:

The change in the price of raw materials multiplied by the actual materials bought calculates which variance?

When preparing its sales forecast, an organisation can use the 'bottom-up' approach. What is one of the features of this approach?

Budgets are said to be useful in promoting forward thinking and identification of short-term problems, because:

Where there is an insignificant adverse variance, management is best advised to:

What variance does the difference between the actual cost of the direct labour hours worked and the planned cost of the direct labour hours measure?

What does flexing the budget mean?

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Cost-Volume-Profit Analysis and Relevant Costing

Full Costing

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters

Exam 11: Budgeting

How is a master budget best described?

A budget system that always provides plans for a full 12 months into the future is known as:

What is the best description of the role of the budget committee?

If the opening balance of cash for one month is $20,000, cash receipts are estimated to be $398,000 and cash payments are estimated as $300,000, the opening cash balance at the beginning of the next month is:

The reconciliation between budgeted profit and actual profit can be summarised as:

Budgets are generally regarded as having several areas of usefulness. Which of these is not one of them?

If the principal objective of a firm is to enhance wealth, the most important budget target to meet is:

The change in the price of raw materials multiplied by the actual materials bought calculates which variance?

When preparing its sales forecast, an organisation can use the 'bottom-up' approach. What is one of the features of this approach?

Budgets are said to be useful in promoting forward thinking and identification of short-term problems, because:

Where there is an insignificant adverse variance, management is best advised to:

What variance does the difference between the actual cost of the direct labour hours worked and the planned cost of the direct labour hours measure?

What does flexing the budget mean?

Introduction to Accounting

Measuring and Reporting Financial Position

Measuring and Reporting Financial Performance

Introduction to Limited Companies

Regulatory Framework for Companies

Measuring and Reporting Cash Flows

Corporate Social Responsibility and Sustainability Accounting

Analysis and Interpretation of Financial Statements

Cost-Volume-Profit Analysis and Relevant Costing

Full Costing

Capital Investment Decisions

The Management of Working Capital

Financing the Business

Filters