Deck 8: Budgetary Planning

Question 1

If a company produces and sells goods to order,the sales budget and production budget are identical.A company that produces and sells goods to order would not carry a finished goods inventory,which is the difference between a sales budget and a production budget.

Answer 1

True

Question 2

An advantage of budgeting is that it requires managers to evaluate why things did not progress according to the plan.This is not a requirement of budgeting,although managers can use budgets in this way.

Answer 2

False

Question 3

The production budget must be prepared before the sales budget can be prepared.The sales budget is the starting point for preparing the master budget.

Answer 3

False

Question 4

Operating budgets focus on the financial resources needed to support operations.Operating budgets cover the organization's planned operating activities for a particular period;financial budgets focus on the financial resources needed to support operations.

Question 5

The budget translates a company's objectives into financial terms.The budget's role in the organizing process is to translate the company's objectives into financial terms.

Question 6

A short-term objective is a specific action managers use to reach their long term goals.A short-term objective is a specific goal that managers need to achieve in no more than a year to reach their long-term goals.

Question 7

Participative budgeting is more likely to motivate people to work toward the organization's goals than is a top-down approach.This is one of the main advantages of participative budgeting.

Question 8

Budgeted cost of goods sold reflects all the costs required to manufacture and sell the product.Budgeted cost of goods sold reflects all the costs required to manufacture the product,but not sell it.

Question 9

Participative budgeting allows employees throughout the organization to have input into the budget-setting process.This is the main purpose of participative budgeting.

Question 10

Budgets that are tight but attainable are less likely to motivate people than budgets that are easy to achieve.Budgets that are tight but attainable are more likely to motivate people than budgets that are either too easy or too difficult to achieve.

Question 11

Budgeted manufacturing overhead includes indirect manufacturing costs,but not selling or administrative costs.Budgeted manufacturing overhead includes all indirect manufacturing costs such as rent,depreciation on equipment,and utilities.

Question 12

One advantage of participative budgeting is managers can build in budgetary slack.Budgetary slack is a drawback to participative budgeting,not an advantage.

Question 13

The strategic plan is management's vision of what they desire the organization to achieve over the long term.This is the definition of a strategic plan.

Question 14

Manufacturing firms prepare a separate raw materials purchases budget for each material used in production.Each material should have its own budget.

Question 15

Control is forward looking while planning is backward looking.Control is backward looking while planning is forward looking.

Question 16

The direct labor budget is based on budgeted sales levels.The direct labor budget is based on budgeted production levels.

Question 17

Budgeted cash collections are based on the sales budget.Budgeted cash collections translates the sales budget into when it is collected in cash.

Question 18

The selling and administrative expense budget is related to the production budget.The selling and administrative expense budget includes all the costs related to selling the product and managing the business,not the costs of producing the product.

Question 19

Preparing the sales budget includes calculating the revenues to be earned from units sold in addition to the number of units to be sold.Preparation of the sales budget requires multiplying the number of units expected to be sold by the budgeted sales price.

Question 20

Top-down budgeting is when the local managers impose a budget on the top management.Top-town budgeting is when top management sets the budget and imposes it on lower levels of the organization.

Question 21

Which of the following is the forward-looking phase of the planning and control cycle?

A)Planning
B)Directing/Leading
C)Organizing
D)Control

Question 22

A _____________ is the vision of what management wants the organization to achieve over the long term.

A)Strategic plan
B)Long-term objective
C)Short-term objective
D)Tactic

Question 23

Creating a budget is an important part of which phase of the planning and control process?

A)Planning
B)Organizing
C)Directing/Leading
D)Control

Question 24

_____________ are the specific goals that managers want to achieve over a 5 to 10 year horizon.

A)Strategic plans
B)Long-term objectives
C)Short-term objectives
D)Tactics

Question 25

Which of the following is the backward-looking phase of the planning and control cycle?

A)Planning
B)Directing/Leading
C)Organizing
D)Control

Question 26

Which of the following is not a benefit of budgeting?

A)It forces managers to look to the future
B)It plays an important role in communication within the organization
C)It serves an important role in motivating and rewarding employees
D)It builds organizational slack

Question 27

Which of the following sequences is correct?

A)Sales budget - production budget - direct materials budget - budgeted income statement
B)Budgeted income statement - direct materials budget - production budget - sales budget
C)Cash receipts budget - sales budget - production budget - budgeted income statement
D)Inventory budget - production budget - sales budget - selling and administrative budget

Question 28

Which of the following is not a component of the master budget?

A)Operating budget
B)Budgeted income statement
C)Budgeted balance sheet
D)Statement of return on investment

Question 29

Which of the following is not a way to reduce the dysfunctional behaviors associated with budgeting?

A)Create budget slack.
B)Use different budgets for planning and for performance evaluation.
C)Use a continuous or rolling budget approach.
D)Use a zero-based budgeting approach.

Question 30

____________ are the specific actions managers use to achieve their objectives.

A)Strategic plans
B)Long-term objectives
C)Short-term objectives
D)Tactics

Question 31

The starting point for preparing the master budget is the

A)inventory policy.
B)sales budget.
C)production budget.
D)budgeted balance sheet.

Question 32

Which of the following is not included in the operating budget?

A)Budgeted balance sheet
B)Sales budget
C)Selling and administrative budget
D)Raw materials purchases budget

Question 33

Participative budgeting is an approach to budgeting that

A)is top-down in nature.
B)allows top management to set the budget.
C)discourages budget slack.
D)is more likely to motivate people to work towards the organization's goals than a top-down approach.

Question 34

A primary financial budget is the

A)Production budget.
B)Cash budget.
C)Inventory budget.
D)Selling and administrative budget.

Question 35

Parker Corp expects to sell 4,000 units in October,and expects sales to increase 20% each month thereafter.Sales price is expected to stay constant at $8 per unit.What are budgeted revenues for the fourth quarter?

A)$32,000
B)$96,000
C)$115,200
D)$116,480

Question 36

Which of the following is not a source that can be used in preparing the sales budget?

A)Prior sales.
B)The production budget.
C)Industry trends.
D)Marketing activities.

Question 37

Which of the following statements about employee motivation is true?

A)A budget that is too easy to achieve is more likely to motivate than a budget that is too difficult or that is tight but attainable.
B)A budget that is too difficult to achieve is more likely to motivate than a budget that is too easy or that is tight but attainable.
C)A budget that is tight but attainable is more likely to motivate than a budget that is too easy or too difficult to achieve.
D)Budgets are difficult to use for motivation.

Question 38

Which of the following budgets shows how many units will be produced each period?

A)Direct materials budget
B)Direct labor budget
C)Sales budget
D)Production budget

Question 39

A top-down approach to budgeting is one that is

A)participative.
B)motivational.
C)imposed.
D)tight.

Question 40

A detailed plan that translates the company's objectives into financial terms,identifying the resources and expenditures that will be required over the planning horizon is a

A)Strategic plan
B)Budget
C)Tactic
D)Long-term objective

Question 41

When calculating raw materials purchases,the starting point should be

A)actual materials purchases from the previous year.
B)budgeted sales.
C)budgeted production.
D)budgeted cost of raw materials.

Question 42

Jackson Inc.produces leather handbags.The production budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Each handbag requires 0.5 square meters of leather.Jackson Inc.'s leather inventory policy is 30% of next month's production needs.On July 1 leather inventory was expected to be 1,000 square meters.Leather is expected to cost $5.00 per square meter in June,but go up to $6.00 per square meter in July.What is the expected cost of leather purchases in July?

A)$13,800
B)$15,300
C)$16,200
D)$16,300

Question 43

The formula for budgeted raw materials purchases is

A)Budgeted production units + Ending raw materials inventory - Beginning raw materials inventory.
B)Budgeted production units + Beginning raw materials inventory - Ending raw materials inventory.
C)Materials needed for production + Ending raw materials inventory - Beginning raw materials inventory.
D)Materials needed for production + Beginning raw materials inventory - Ending raw materials inventory.

Question 44

Jackson Inc.produces leather handbags.The production budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Each handbag requires 0.5 square meters of leather.Jackson Inc.'s leather inventory policy is 30% of next month's production needs.On July 1 leather inventory was expected to be 1,000 square meters.What will leather purchases be in July?

A)2,300 square meters
B)2,550 square meters
C)2,700 square meters
D)3,575 square meters

Question 45

Lea Company produces hand tools.Budgeted sales for March are 10,000 units.Beginning finished goods inventory in March is budgeted to be 1,300 units,and ending finished goods inventory is budgeted to be 1,400 units.How many units will be produced in March?

A)9,900
B)10,000
C)10,100
D)12,700

Question 46

Budgeted production is calculated by

A)adding budgeted unit sales to budgeted beginning finished goods inventory,and subtracting budgeted ending finished goods inventory.
B)adding budgeted unit sales to budgeted beginning work in process inventory,and subtracting budgeted ending work in process inventory.
C)adding budgeted unit sales to budgeted ending finished goods inventory,and subtracting budgeted beginning finished goods inventory.
D)adding budgeted unit sales to budgeted ending work in process inventory,and subtracting budgeted beginning work in process inventory.

Question 47

Marlow Company produces hand tools.A production budget for the next four months is as follows: March 10,300 units,April 13,300,May 16,500,and June 21,800.Marlow Company's ending finished goods inventory policy is 10% of the following month's sales.Marlow plans to sell 16,000 units in May.What is budgeted ending inventory for March?

A)1,030
B)1,300
C)1,330
D)1,650

Question 48

Jillian Inc.produces leather handbags.The production budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour)and 2.2 hours of skilled labor (paid $15 per hour).How many total labor hours will be budgeted for September?

A)7,500
B)9,750
C)16,500
D)26,250

Question 49

Jeremy Inc.produces leather handbags.The production budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Each handbag requires 0.5 square meters of leather.Jeremy Inc.'s leather inventory policy is 30% of next month's production needs.If the leather policy is met,what will the July 1 inventory be?

A)750 square meters
B)1,050 square meters
C)1,825 square meters
D)300 square meters

Question 50

Jackson Inc.produces leather handbags.The production budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Each handbag requires 0.5 square meters of leather.Jackson Inc.'s leather inventory policy is 30% of next month's production needs.On July 1 leather inventory was expected to be 1,000 square meters.What will leather purchases be in August?

A)7,150 square meters
B)3,575 square meters
C)7,075 square meters
D)3,425 square meters

Question 51

Budgeted direct labor hours are calculated as

A)Budgeted production units × Direct labor requirements per unit + Ending inventory - Beginning inventory.
B)Budgeted production units × Direct labor requirements per unit + Beginning inventory - Ending inventory.
C)Budgeted production units × Direct labor requirements per unit.
D)Budgeted sales units × Direct labor requirements per unit.

Question 52

When calculating the direct labor budget,the starting point should be

A)actual direct labor hours from the previous year.
B)budgeted sales.
C)budgeted production.
D)budgeted cost of direct labor.

Question 53

Meadow Company produces hand tools.A sales budget for the next four months is as follows: March 10,000 units,April 13,000,May 16,000 and June 21,000.Meadow Company's ending finished goods inventory policy is 10% of the following month's sales.What is budgeted ending finished goods inventory for May?

A)1,000
B)1,300
C)1,600
D)2,100

Question 54

Jillian Inc.produces leather handbags.The production budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour)and 2.2 hours of skilled labor (paid $15 per hour).How many unskilled labor hours will be budgeted for August?

A)7,000
B)9,100
C)15,400
D)24,500

Question 55

Meadow Company produces hand tools.A sales budget for the next four months is as follows: March 10,000 units,April 13,000,May 16,000 and June 21,000.Meadow Company's ending finished goods inventory policy is 10% of the following month's sales.March 1 inventory is projected to be 1,400 units.How many units will be produced in March?

A)10,000
B)9,900
C)13,000
D)10,100

Question 56

Jared Inc.produces leather handbags.The sales budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Each handbag requires 0.5 square meters of leather.Jared Inc.'s finished goods inventory policy is 10% of next month's sales needs.Jared Inc.'s leather inventory policy is 30% of next month's production needs.What will leather purchases be in August?

A)3,425 square meters
B)3,450 square meters
C)3,508 square meters
D)3,600 square meters

Question 57

If a company is planning to build inventory,

A)production should exceed sales.
B)sales should exceed production.
C)production should equal sales.
D)production should equal inventory.

Question 58

Johnson Inc.produces leather handbags.Johnson Inc.estimates it will use 3,500 square meters of leather in production in August,and 3,750 square meters of leather in production in September.Johnson Inc.'s leather inventory policy is 30% of next month's production needs.What will leather purchases be in August?

A)3,425 square meters
B)3,500 square meters
C)3,575 square meters
D)4,625 square meters

Question 59

Meadow Company produces hand tools.A sales budget for the next four months is as follows: March 10,000 units,April 13,000,May 16,000 and June 21,000.Meadow Company's ending finished goods inventory policy is 10% of the following month's sales.March 1 inventory is projected to be 1,400 units.How many units will be produced in April?

A)13,300
B)15,900
C)12,700
D)13,000

Question 60

Marlow Company produces hand tools.A production budget for the next four months is as follows: March 10,300 units,April 13,300,May 16,500,and June 21,800.Marlow Company's ending finished goods inventory policy is 10% of the following month's sales.Meadow plans to sell 16,000 units in May.How many units will be sold in April?

A)12,380
B)13,000
C)13,570
D)13,620

Question 61

Atlantic,Inc.has prepared the following budgets for March.In March,budgeted production equals budgeted sales of 1,000 units,and raw materials inventory will stay constant.What is budgeted cost of goods sold for March?

A)$16,800
B)$24,300
C)$31,800
D)$43,800

Question 62

Skylark has forecast production for the next three months as follows: July 4,900 units,August 6,600 units,September 7,500 units.Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced.What is budgeted manufacturing overhead for July?

A)$29,400
B)$47,000
C)$46,400
D)$17,000

Question 63

Budgeted cost of goods sold should include which of the following?

A)Raw materials and direct labor.
B)Raw materials,direct labor,and manufacturing overhead.
C)Raw materials,direct labor,manufacturing overhead,and selling expenses.
D)Raw materials,direct labor,manufacturing overhead,selling expenses,and administrative expenses.

Question 64

Jaybird Inc.produces leather handbags.The sales budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales.Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour)and 2.2 hours of skilled labor (paid $15 per hour).How much is total labor cost during the three months July through September?

A)$69,300
B)$327,670
C)$846,300
D)$859,320

Question 65

Lemon,Inc.has prepared the following budgets for March.In March,budgeted production is 1,000 units,budgeted sales is 1,200 units,and raw materials inventory and unit costs will stay constant.What is budgeted cost of goods sold for March?

A)$40,734
B)$42,400
C)$48,880
D)$50,880

Question 66

Larken has forecast sales for the next three months as follows: July 4,000 units,August 6,000 units,September 7,500 units.Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand.July 1 inventory is projected to be 1,500 units.Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced.What is budgeted manufacturing overhead for August?

A)$56,600
B)$17,000
C)$53,000
D)$38,600

Question 67

The budgeted income statement is a combination of

A)All the operating budgets.
B)All the operating budgets plus the budgeted balance sheet.
C)The direct materials budget,the direct labor budget,and the manufacturing overhead budget.
D)The production budget,the cost of goods sold budget,and the selling and administrative expense budget.

Question 68

Jillian Inc.produces leather handbags.The production budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour)and 2.2 hours of skilled labor (paid $15 per hour).How much will be paid to skilled labor during the three months July through September?

A)$742,500
B)$643,500
C)$4,387,500
D)$292,500

Question 69

Crystal,Inc.has prepared the following budgets for March.In March,budgeted production is 1,000 units,budgeted sales is 1,200 units,and raw materials inventory will stay constant.What is budgeted cost of goods sold for March?

A)$20,367
B)$21,200
C)$25,440
D)$35,040

Question 70

Pacific has forecast sales for the next three months as follows: July 4,000 units,August 6,000 units,September 7,500 units.Pacific's policy is to have an ending inventory of 40% of the next month's sales needs on hand.July 1 inventory is projected to be 1,500 units.Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for August?

A)$50,000
B)$47,000
C)$33,000
D)$32,000

Question 71

Crystal,Inc.has prepared the following budgets for March.In March,budgeted production is 1,000 units,budgeted sales is 1,200 units,and raw materials inventory unit costs will stay constant.What is budgeted cost of goods sold for March?

A)$30,551
B)$31,800
C)$36,660
D)$38,160

Question 72

Jaybird Inc.produces leather handbags.The sales budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Jaybird Inc.'s ending finished goods inventory policy is 10% of the following month's sales.Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour)and 2.2 hours of skilled labor (paid $15 per hour).What will be the total labor cost for the month of August?

A)$24,675
B)$225,680
C)$303,800
D)$305,970

Question 73

Which of the following would not be an example of a cost to include in a selling and administrative expense budget?

A)Legal expenses
B)Accounting services
C)Fixed manufacturing overhead
D)Franchise fees

Question 74

Harney,Inc.has prepared the following budgets for March.In March,budgeted production equals budgeted sales,and raw materials inventory will stay constant.What is budgeted cost of goods sold for March?

A)$14,560
B)$24,960
C)$27,560
D)$37,960

Question 75

Jillian Inc.produces leather handbags.The production budget for the next four months is: July 5,000 units,August 7,000,September 7,500,October 8,000.Each handbag requires 1.3 hours of unskilled labor (paid $8 per hour)and 2.2 hours of skilled labor (paid $15 per hour).What will be the total labor cost for the month of August?

A)$303,800
B)$231,000
C)$121,500
D)$161,000

Question 76

Skylark has forecast production for the next three months as follows: July 4,900 units,August 6,600 units,September 7,500 units.Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced.What is budgeted manufacturing overhead for August?

A)$56,600
B)$17,000
C)$39,600
D)$62,000

Question 77

Skybird has forecast sales for the next three months as follows: July 4,000 units,August 6,000 units,September 7,500 units.Skybird's policy is to have an ending inventory of 40% of the next month's sales needs on hand.July 1 inventory is projected to be 1,500 units.Monthly costs are budgeted as follows: What is budgeted manufacturing overhead cost for July?

A)$32,000
B)$41,000
C)$46,400
D)$17,000

Question 78

Walnut has forecast sales for the next three months as follows: July 4,000 units,August 6,000 units,September 7,500 units.Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand.July 1 inventory is projected to be 1,500 units.Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold.What are budgeted selling and administrative expenses for July?

A)$24,500
B)$39,500
C)$35,000
D)$30,500

Question 79

Walnut has forecast sales for the next three months as follows: July 4,000 units,August 6,000 units,September 7,500 units.Walnut's policy is to have an ending inventory of 40% of the next month's sales needs on hand.July 1 inventory is projected to be 1,500 units.Selling and administrative costs are budgeted to be $15,000 per month plus $5 per unit sold.What are budgeted selling and administrative expenses for September?

A)$30,000
B)$67,500
C)$32,500
D)$52,500

Question 80

Larken has forecast sales for the next three months as follows: July 4,000 units,August 6,000 units,September 7,500 units.Larken's policy is to have an ending inventory of 40% of the next month's sales needs on hand.July 1 inventory is projected to be 1,500 units.Monthly manufacturing overhead is budgeted to be $17,000 plus $6 per unit produced.What is budgeted manufacturing overhead for July?

A)$29,400
B)$41,000
C)$46,400
D)$17,000