Deck 8: The Master Budget

Question 1

The amount of raw materials that must be purchased can be computed by the following formula: Beginning inventory + Materials required - Ending inventory.

Answer 1

False

Question 2

The operating budget is expressed both in units and dollars.

Answer 2

True

Question 3

The effect of capital expenditures on the master budget is reflected through cash payments made for acquisition of capital assets.

Answer 3

True

Question 4

The financial budget is prepared before the operating budget.

Question 5

Strategic planning is focused on long-range goals of five to ten years.

Question 6

The financial budget is prepared after the operating budget.

Question 7

The amount of raw materials that must be purchased can be computed by the following formula: Ending inventory + Materials required - Beginning inventory.

Question 8

An annual budget is an example of a single use tactical plan.

Question 9

Strategic planning is focused on short-term goals of less than five years.

Question 10

The first stage in the budgeting process is the preparation of a cash collections budget.

Question 11

Most tactical plans are single use plans.

Question 12

An annual budget is an example of a strategic plan.

Question 13

In a manufacturing organization,the cash budget is prepared immediately after the sales budget.

Question 14

In a manufacturing organization,the production budget is prepared immediately after the sales budget.

Question 15

Top management should be directly involved in strategic planning for an organization.

Question 16

In estimating factory overhead,it is necessary to separate costs into their fixed and variable components.

Question 17

The budget is an important source of feedback for an organization.

Question 18

Operational management should be directly involved with the strategic planning of an organization.

Question 19

The effect of capital expenditures on the master budget is reflected through periodic depreciation charges in the cash outflow portion.

Question 20

The first stage in the budgeting process is the preparation of a sales budget.

Question 21

Long-range planning carried out by top management is referred to as ______________________________.

Question 22

A continuous budget is prepared by adding a new budget month as each month expires.

Question 23

A budget manual should include a statement of the budgetary purpose and its desired results.

Question 24

Top management can reduce slack by using a bonus system to link performance to the budget.

Question 25

A participatory budget is developed by both top management and operating personnel.

Question 26

The starting point for any master budget is the _________________________.

Question 27

A budget that is expressed in terms of both units and dollars is referred to a(n)______________________________.

Question 28

The final step in the master budget process is preparation of the _________________________.

Question 29

The cash budget is constructed after all other budgets have been completed.

Question 30

Budgetary slack is frequently found in imposed budgets.

Question 31

The final step in constructing the master budget is the preparation of pro-forma financial statements for the period.

Question 32

A calendar of scheduled budgetary activities helps to coordinate the budgeting process.

Question 33

Budgetary slack is an effective motivator for employees,because it reduces employee frustration when goals cannot be achieved.

Question 34

The document that results from the budgeting process is referred to as the ______________________________.

Question 35

A budget that indicates the funds to be generated or consumed during the period is referred to as a ______________________________.

Question 36

Balances for Accounts Receivable and Sales Discounts are projected after the cash collections schedule is prepared.

Question 37

Short-term planning designed to address a specific set of circumstances is referred to as ______________________________.

Question 38

A budget manual should include pro-forma financial statements for the upcoming period.

Question 39

In a manufacturing organization,the budget that is prepared after the sales budget is the ______________________________.

Question 40

Balances for Accounts Receivable and Sales Discounts are projected before the cash collections schedule is prepared.

Question 41

Which of the following is a basic element of effective budgetary control?

A)cost behavior patterns
B)cost-volume-profit analysis
C)standard costing
D)all of the above

Question 42

In a manufacturing organization,the budgets that are prepared after the production budget are the ______________________________,_________________________,and ____________________ budgets.

Question 43

A budget that is prepared by adding a new budget month as each month expires is referred to as a(n)______________________________.

Question 44

If revenues are intentionally underestimated during the budgeting process,______________________________ has been created.

Question 45

When actual performance varies from the budgeted performance,managers will be more likely to revise future budgets if the variances were

A)controllable rather than uncontrollable.
B)uncontrollable rather than controllable.
C)favorable rather than unfavorable.
D)small.

Question 46

Which of the following is not an "operating" budget?

A)sales budget
B)production budget
C)purchases budget
D)capital budget

Question 47

The budget that focuses on an organization's long-term needs is referred to as a(n)______________________________.

Question 48

Tactical planning usually involves which level of management?

A)middle
B)top
C)middle and top
D)operational

Question 49

The master budget is a static budget because it

A)is geared to only one level of production and sales.
B)never changes from one year to the next.
C)covers a preset period of time.
D)always contains the same operating and financial budgets.

Question 50

Which of the following statements is true?

A)All organizations have the same set of budgets.
B)All organizations are required to budget.
C)Budgets are a quantitative expression of an organization's goals and objectives.
D)Budgets should never be used to evaluate performance.

Question 51

Key variables that are identified in strategic planning are

A)normally controllable if they are internal.
B)seldom if ever controllable.
C)normally controllable if they occur in a domestic market.
D)normally uncontrollable if they are internal.

Question 52

A budget aids in

A)communication.
B)motivation.
C)coordination.
D)all of the above.

Question 53

A budget is

A)a planning tool.
B)a control tool.
C)a means of communicating goals to the firm's divisions.
D)all of the above.

Question 54

Ineffective budgets and/or control systems are characterized by the use of

A)budgets as a planning tool only and disregarding them for control purposes.
B)budgets for motivation.
C)budgets for coordination.
D)the budget for communication.

Question 55

A budget that is developed by both top management and operating personnel is referred to as a(n)______________________________.

Question 56

A budget that is developed with little input from operating personnel is referred to as a(n)______________________________.

Question 57

Strategic planning is

A)planning activities for promoting products for the future.
B)planning for appropriate assignments of resources.
C)setting standards for the use of important but hard-to-find materials.
D)stating and establishing long-term plans.

Question 58

Measuring the firm's performance against established objectives is part of which of the following functions?

A)Planning
B)Controlling
C)Organizing
D)Staffing

Question 59

External factors that cause the achievement of company goals are the

A)annual budget.
B)industry price and cost structure.
C)talents possessed by its managers.
D)board of directors.

Question 60

The preparation of an organization's budget

A)forces management to look ahead and try to see the future of the organization.
B)requires that the entire management team work together to make and carry out the yearly plan.
C)makes performance review possible at all levels of management.
D)all of the above.

Question 61

Which of the following equations can be used to budget purchases?
(BI = beginning inventory,EI = ending inventory desired,CGS = budgeted cost of goods sold,P = budgeted purchases)

A)P = CGS + BI - EI
B)P = CGS + BI
C)P = CGS + EI + BI
D)P = CGS + EI - BI

Question 62

Both the budgeted quantity of material to be purchased and the budgeted quantity of material to be consumed can be found in the

A)material purchases budget.
B)production budget.
C)pro forma income statement.
D)cash budget.

Question 63

The master budget usually includes

A)an operating budget.
B)a capital budget.
C)pro forma financial statements.
D)all of the above.

Question 64

It is least likely that a production budget revision would cause a revision in the

A)capital budget.
B)cash budget.
C)purchases budget.
D)pro forma balance sheet.

Question 65

The master budget is a

A)static budget.
B)flexible budget.
C)qualitative expression of a prior goal.
D)qualitative expression of a future goal.

Question 66

The selling,general,and administrative expense budget is based on the ____ budget.

A)production
B)sales
C)cash
D)purchases

Question 67

Chronologically,in what order are the sales,purchases,and production budgets prepared?

A)sales,purchases,production
B)sales,production,purchases
C)production,sales,purchases
D)purchases,sales,production

Question 68

An example of a recurring short-term plan is

A)a probable product line change.
B)expansion of plant and facilities.
C)a unit sales forecast.
D)a change in marketing strategies.

Question 69

If a company has a policy of maintaining an inventory of finished goods at a specified percentage of the next month's budgeted sales,budgeted production for January will exceed budgeted sales for January when budgeted

A)February sales exceed budgeted January sales.
B)January sales exceed budgeted December sales.
C)January sales exceed budgeted February sales.
D)December sales exceed budgeted January sales.

Question 70

The material purchases budget tells a manager all of the following except the

A)quantity of material to be purchased each period.
B)quantity of material to be consumed each period.
C)cost of material to be purchased each period.
D)cash payment for material each perioD.

Question 71

Of the following budgets,which one is least likely to be determined by the dictates of top management?

A)sales
B)material usage
C)revenues
D)general and administrative

Question 72

The budgeted amount of selling and administrative expense for a period can be found in the

A)sales budget.
B)cash budget.
C)pro forma income statement.
D)pro forma balance sheet.

Question 73

Budgeted production for a period is equal to

A)the beginning inventory + sales - the ending inventory.
B)the ending inventory + sales - the beginning inventory.
C)the ending inventory + the beginning inventory - sales.
D)sales - the beginning inventory + purchases.

Question 74

A company that maintains a raw material inventory,which is based on the following month's production needs,will purchase less material than it uses in a month where

A)sales exceed production.
B)production exceeds sales.
C)planned production exceeds the next month's planned production.
D)planned production is less than the next month's planned production.

Question 75

If the chief accountant of a firm has to prepare an operating budget for the coming year,the first budget to be prepared is the

A)sales budget.
B)cash budget.
C)purchases budget.
D)capital budget.

Question 76

The amount of raw material purchased in a period may be different than the amount of material used that period because

A)the number of units sold may be different from the number of units produced.
B)finished goods inventory may fluctuate during the period.
C)the raw material inventory may increase/decrease during the period.
D)companies often pay for material in the period after it is purchaseD.

Question 77

Depreciation on the production equipment would appear in which of the following budgets?

A)cash budget
B)production budget
C)selling and administrative expense budget
D)manufacturing overhead budget

Question 78

Which of the following is usually perceived as being the master budget's greatest advantage to management?

A)performance analysis
B)increased communication
C)increased coordination
D)required planning

Question 79

Chronologically,the first part of the master budget to be prepared would be the

A)sales budget.
B)production budget.
C)cash budget.
D)pro forma financial statements.

Question 80

A purchases budget

A)does not reflect early payment discounts granted by vendors.
B)is the same thing as a production budget.
C)is needed only if a firm does not pay for its merchandise in the same period as it is purchased.
D)is affected by a firm's inventory policy only if the firm purchases on credit.