Deck 19: Budgets

Question 1

The managers of Jack Ltd are preparing a production budget for December 201X. The sales budget for December 20X1 is 8,000 units dropping to 6,500 for January 20X2. The company's policy is to hold stocks of finished goods at 50% of the next month's sales. What is the production budget in units in December 20X1?

A) 6500
B) 5260
C) 7250
D) 8000

Answer 1

C

Question 2

A fixed budget system compares actual results with the original budget.

Answer 2

True

Question 3

In a flexed budgetary system the budget must be flexed to bring it into line with the budgeted activity level.

Answer 3

False

Question 4

The term budget process refers to the allocation of costs to the master budget.

Question 5

What is the total purchase cost of material C?

A) £674
B) £834
C) £777
D) £795

Question 6

Using the data in Question 4 above, what is the number of units of Material A required for production?

A) 278
B) 213
C) 312
D) 284

Question 7

A budget is a long term plan.

Question 8

Using the data in Question 4 relating to PHH Ltd above, what is the total cost of material B used in production of Q, P and R?

A) £830
B) £936
C) £980
D) £630

Question 9

BH Engineering Limited purchases all its goods on credit. On average, 60% are paid for in the month following purchase, 20% in the month after that and 20% in the month after that. Purchases of goods are budgeted as follows for the second half of 201X: July £3400 August £6650 September £5000 October £4350 November £8800 December £4350 How much cash outlay will be budgeted in respect of credit purchases for the month of November 20X4?

A) £4570
B) £2900
C) £4940
D) £5680

Question 10

PWH Ltd is currently developing an overhead budget for 201X. The following details the total fixed overheads for this period: Factory premises costs 1 550 550 Production supervision 234000 Other production overheads 777 700 Selling overheads 456 200 Administration and office overheads 586 400 1 042 600 Estimated production and sales for the year is 850000 units. Each unit requires 1.5 machine hours. Production overhead is recovered per machine hour. What is the budgeted production overhead recovery rate for 201X (to the nearest penny)?

A) £2.01
B) £3.10
C) £2.23
D) £2.67

Question 11

Which of the following is the starting point in the development of a budget?

A) Capital expenditure
B) Cash flow
C) Sales
D) Production

Question 12

Which of the following does not describe on of the purposes of a budget?

A) Compel planning
B) Communication
C) Allocate overheads to products
D) Basis for a control mechanism

Question 13

Budgets do not take account of resource implication the focus is on money.

Question 14

LWJ Ltd managers are preparing a production budget for the month of August 20X1. The sales budget for the month is 6500 units. Sales for September 20X1 are budgeted at 8760 units. The company's policy is to hold closing stock of finished goods at 70% of the next following month's sales levels. What is the production budget in units for August 20X6?

A) £8082
B) £8800
C) £7650
D) £8787

Question 15

PHH is a manufacturing company. The managers are currently preparing the company's annual budgets. The following has been extracted: Product Estimated sales units Opening stock units Closing stock units Q 60 17 17 P 34 9 11 R 30 8 12 Material Cost per unit £ Units of Material used per unit of product Q P R Stock Opening Closing A 7 - 3 5 21 25 B 4 1 2 3 17 23 C 5 2 - 1 10 15 What number of units that should be produced for product R?

A) 40
B) 36
C) 20
D) 34

Question 16

The master budget will normally consist of the budgeted income statement and balance sheet.

Question 17

The management accountant is preparing the master budget for her retail firm. The following information has been supplied: Sales £300000 Opening stock £40000 Closing stock £60000 Mark up 25% What amount should be budgeted for purchases?

A) £220000
B) £225000
C) £240000
D) £260000

Question 18

A company's flexible budget for 1000 units of production is: £ Direct Materials 28,000 Direct Labour 18,400 Variable Overheads 9,700 Fixed Overheads : Depreciation 2000 Fixed Overheads other 2,900 £61,000 The flexible budget cost formula is:

A) £56.10 per unit
B) £56.10 plus £2900
C) £56.10 plus £4900
D) £61.00 per unit

Question 19

Functional budgets are formed to produce a master budget.

Question 20

The annual budget is a way of getting managers to look ahead.