Deck 11: The Master Budget

Question 1

Participative budgeting is the active participation of all affected employees in the formulation of the budgets.

Answer 1

True

Question 2

The first step in preparing the master budget is the preparation of the budgeted income statement.

Answer 2

False

Question 3

The cash budget is the first budget prepared in the master budget.

Answer 3

False

Question 4

A sales budget is a prediction of sales under a given set of conditions.

Question 5

The systematic varying of budget data input in order to determine the effects of each change on the budget is called operating analysis.

Question 6

A budget is a formal, quantitative expression of plans that provides a benchmark against which to measure actual performance.

Question 7

Budgeted purchases are equal to the cost of goods sold plus any beginning inventory.

Question 8

A cash budget is a statement of planned cash receipts and cash disbursements.

Question 9

The master budget includes forecasts for all of the following EXCEPT

A) sales.
B) number of employees.
C) balance sheets.
D) cash disbursements.

Question 10

Budgeting forces managers to think ahead and to anticipate and prepare for changing conditions.

Question 11

The master budget quantifies targets for all of the following EXCEPT

A) sales.
B) production.
C) markets.
D) cost-driver activity.

Question 12

The accuracy of estimated purchases budgets, production schedules, and costs depends on the detail and accuracy of the budgeted operating expenses.

Question 13

A capital budget is a periodic business plan that includes a coordinated set of detailed operating schedules and financial statements.

Question 14

An operating budget is the major part of a master budget, and focuses on the income statement and its supporting schedules.

Question 15

Master budgets are sometimes called

A) pro forma statements.
B) capital budgets.
C) strategic plans.
D) accounting budgets.

Question 16

Decisions made during long-range planning include all of the following EXCEPT

A) addition or deletion of product line.
B) design and location of new plants.
C) acquisitions of buildings and equipment.
D) acquisition of office supplies.

Question 17

Financial planning models are only as good as the assumptions and the inputs used to build and manipulate them.

Question 18

Cash budgets help management to avoid having unnecessary idle cash on the one hand, and unnecessary cash deficiencies on the other.

Question 19

Managers need budgets for all of the following reasons EXCEPT

A) to guide them in allocating resources.
B) to maintain control.
C) to enable them to measure and reward progress.
D) to determine which individual to hire.

Question 20

Financial planning models are mathematical models of the master budget that can react to any set of assumptions about sales, costs, or product mix.

Question 21

________ are the most forward-looking budgets, which set the overall goals and objectives of the organization.

A) Strategic plans
B) Capital budgets
C) Pro forma statements
D) Continuous budgets

Question 22

Which of the following is NOT a financial budget?

A) Purchases budget
B) Capital budget
C) Cash budget
D) Budgeted balance sheet

Question 23

________ includes the capital budget, cash budget, and budgeted balance sheet.

A) Operating budget
B) Financial budget
C) Continuous budget
D) Strategic plan

Question 24

Which of the following is NOT a financial budget?

A) Budgeted balance sheet
B) Capital budget
C) Cash budget
D) Budgeted income statement

Question 25

The first step in preparing the operating budget is preparing the

A) sales budget.
B) operating expense budget.
C) purchases budget.
D) budgeted income statement.

Question 26

Which of the following is NOT an operating budget?

A) Sales budget
B) Operating expenses budget
C) Budgeted income statement
D) Cash budget

Question 27

The last step in preparing the financial budget is preparing the

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

Question 28

The second step in preparing the master budget is preparing the

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

Question 29

________ is a major part of a master budget that focuses on the income statement and its supporting schedules.

A) Operating budget
B) Financial budget
C) Continuous budget
D) Strategic plan

Question 30

Which of the following is NOT a major benefit of budgeting?

A) It compels managers to think ahead.
B) It provides definite expectations that are the best framework for judging subsequent performance.
C) It aids managers in coordinating their efforts, so that the objectives of the organization as a whole match the objectives of its parts.
D) It allows managers to operate day to day, reacting to current events rather than planning for the future.

Question 31

________ are sometimes called rolling budgets.

A) Strategic plans
B) Capital budgets
C) Pro forma statements
D) Continuous budgets

Question 32

Expenses that are NOT influenced by sales or other cost-driver activity include all of the following EXCEPT

A) delivery expenses.
B) rent expense.
C) insurance expense.
D) amortization expense.

Question 33

An example of a financial budget is a(n)

A) sales budget.
B) cash budget.
C) purchases budget.
D) budgeted income statement.

Question 34

Which of the following is NOT an operating budget?

A) Purchases budget
B) Capital budget
C) Cost of goods sold budget
D) Budgeted income statement

Question 35

Which of the following is a major part of the master budget that focuses on the income statement and its supporting schedules?

A) Operating budget
B) Financial budget
C) Cash budget
D) Capital budget

Question 36

________ are budgets that detail the planned expenditures for facilities, equipment, new products, and other long-term investments.

A) Strategic plans
B) Capital budgets
C) Pro forma statements
D) Continuous budgets

Question 37

________ are another term for forecasted financial statements.

A) Strategic plans
B) Capital budgets
C) Pro forma statements
D) Continuous budgets

Question 38

An example of an operating budget is a(n)

A) capital budget.
B) cash budget.
C) sales budget.
D) budgeted balance sheet.

Question 39

A statement of planned cash receipts and disbursements is called a(n)

A) operating budget.
B) cash budget.
C) loan budget.
D) planning budget.

Question 40

Important factors considered by sales forecasters include all of the following EXCEPT

A) past patterns of sales.
B) estimates made by the sales force.
C) changes in product mix.
D) the desired level of sales.

Question 41

Adel, Inc. has the following information:
Budgeted Expenses per Month
Note: All cash expenses are paid as incurred.
The total cash disbursements for expenses in February should be

A) $46,900.
B) $38,400.
C) $31,200.
D) $39,700.

Question 42

The following sales budget has been prepared:
Collections are 50 percent in the month of sale, 40 percent in the month following the sale, and 5 percent two months following the sale. The remaining 5 percent is expected to be uncollectible.
The total cash collections in August will be

A) $180,000.
B) $100,000.
C) $165,000.
D) $ 85,000.

Question 43

Crouse Corporation has the following information:
The cost of goods sold percentage is 65 percent, and the desired inventory level is 25 percent of next month's sales.
The desired ending inventory for June is

A) $40,625.
B) $39,000.
C) $21,000.
D) $42,250.

Question 44

The following sales budget has been prepared:
Collections are 50 percent in the month of sale, 40 percent in the month following the sale, and 5 percent two months following the sale. The remaining 5 percent is expected to be uncollectible.
The total cash collections in July will be

A) $140,000.
B) $126,000.
C) $80,000.
D) $66,000.

Question 45

Miller Company has the following data:
The gross profit rate is 40 percent, and the inventory at the end of December was $72,000. Desired inventory levels are 30 percent of next month's sales.
The total purchases budgeted for February should be

A) $216,000.
B) $230,400.
C) $295,200.
D) $144,000.

Question 46

The following sales budget has been prepared:
Collections are 50 percent in the month of sale, 40 percent in the month following the sale, and 5 percent two months following the sale. The remaining 5 percent is expected to be uncollectible.
The total cash received in June on June sales will be

A) $ 70,000.
B) $100,000.
C) $ 86,000.
D) $ 46,000.

Question 47

Miller Company has the following data:
The gross profit rate is 40 percent, and the inventory at the end of December was $72,000. Desired inventory levels are 30 percent of next month's sales.
The desired ending inventory for April is

A) $ 86,400.
B) $ 57,600.
C) $144,000.
D) undeterminable.

Question 48

Adel, Inc. has the following information:
Budgeted Expenses per Month
Note: All cash expenses are paid as incurred.
The total expenses for the month of April will be

A) $45,300.
B) $38,400.
C) $31,200.
D) $38,100.

Question 49

Crouse Corporation has the following information:
The cost of goods sold percentage is 65 percent, and the desired inventory level is 25 percent of next month's sales.
The total purchases budgeted for July should be

A) $169,000.
B) $208,000.
C) $165,750.
D) none of the above.

Question 50

Ogden Manufacturing Company has the following information:
Budgeted Expenses per Month
Note: All cash expenses are paid as incurred.
The total expenses for the month of March will be

A) $75,000.
B) $76,700.
C) $78,000.
D) $84,200.

Question 51

The following sales budget has been prepared:
Collections are 50 percent in the month of sale, 40 percent in the month following the sale, and 5 percent two months following the sale. The remaining 5 percent is expected to be uncollectible.
The total cash received in May on May sales will be

A) $60,000.
B) $90,000.
C) $40,000.
D) none of the above.

Question 52

Ogden Manufacturing Company has the following information:
Budgeted Expenses per Month
Note: All cash expenses are paid as incurred.
The total cash disbursements for expenses in January should be

A) $75,000.
B) $75,100.
C) $82,600.
D) $70,500.

Question 53

Crouse Corporation has the following information:
The cost of goods sold percentage is 65 percent, and the desired inventory level is 25 percent of next month's sales.
The desired ending inventory for July is

A) $39,000.
B) $42,250.
C) $21,000.
D) $31,000.

Question 54

Miller Company has the following data:
The gross profit rate is 40 percent, and the inventory at the end of December was $72,000. Desired inventory levels are 30 percent of next month's sales.
The desired ending inventory for March is

A) $86,400.
B) $144,000.
C) $57,600.
D) undeterminable.

Question 55

The following sales budget has been prepared:
Collections are 50 percent in the month of sale, 40 percent in the month following the sale, and 10 percent two months following the sale. No uncollectible accounts are anticipated.
The total cash collections in December will be

A) $650,000.
B) $394,000.
C) $270,000.
D) $664,000.

Question 56

Adel, Inc. has the following information:
Budgeted Expenses per Month
Note: All cash expenses are paid as incurred.
Cash disbursements can be made for all of the following EXCEPT

A) merchandise.
B) payroll.
C) sales.
D) fixed assets.

Question 57

Adel, Inc. has the following information:
Budgeted Expenses per Month
Note: All cash expenses are paid as incurred.
The total cash disbursements for expenses in May should be

A) $38,400.
B) $38,900.
C) $31,200.
D) $46,100.

Question 58

Miller Company has the following data:
The gross profit rate is 40 percent, and the inventory at the end of December was $72,000. Desired inventory levels are 30 percent of next month's sales.
The total purchases budgeted for March should be

A) $350,400.
B) $264,000.
C) $271,200.
D) $176,000.

Question 59

Ogden Manufacturing Company has the following information:
Budgeted Expenses per Month
Note: All cash expenses are paid as incurred.
The total cash disbursements for expenses in February should be

A) $80,000.
B) $75,000.
C) $76,000.
D) none of the above.

Question 60

Crouse Corporation has the following information:
The cost of goods sold percentage is 65 percent, and the desired inventory level is 25 percent of next month's sales.
The total purchases budgeted for June should be

A) $204,750.
B) $164,125.
C) $162,500.
D) $ 87,500.

Question 61

The following sales budget has been prepared:
Collections are 50 percent in the month of sale, 40 percent in the month following the sale, and 10 percent two months following the sale. No uncollectible accounts are anticipated.
The total cash received in October on October sales will be

A) $430,000.
B) $250,000.
C) $590,000.
D) none of the above.

Question 62

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
Mathematical models of the master budget that can react to any set of assumptions about sales, costs, and product mix are called

A) working models.
B) financial planning models.
C) accounting models.
D) master models.

Question 63

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
When budgets are formulated with the active participation of all affected employees, the process is called

A) financial budgeting.
B) mathematical budgeting.
C) participative budgeting.
D) relative budgeting.

Question 64

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
An important factor considered by sales forecasters include(s)

A) past patterns of sales.
B) estimates made by the sales force.
C) general economic conditions.
D) all of the above.

Question 65

The following sales budget has been prepared:
Collections are 50 percent in the month of sale, 40 percent in the month following the sale, and 10 percent two months following the sale. No uncollectible accounts are anticipated.
The total cash received in September on September sales will be

A) $200,000.
B) $600,000.
C) $544,000.
D) $400,000.

Question 66

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
Which of the following statements is NOT true?

A) Managers often compare actual results with budgets in evaluating subordinates.
B) Too often, top management and accountants are overly concerned with the mechanics of budgets.
C) A serious human relations problem arises when budgets stress one set of performance goals, but employees and managers are rewarded for performance on other dimensions.
D) All of the above are true statements.

Question 67

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
The cash disbursements in December for October purchases will be

A) $108,750.
B) $ 43,500.
C) $ 65,250.
D) $ 46,000.

Question 68

The following sales budget has been prepared:
Collections are 50 percent in the month of sale, 40 percent in the month following the sale, and 10 percent two months following the sale. No uncollectible accounts are anticipated.
The total cash collections in November will be

A) $394,000.
B) $654,000.
C) $680,000.
D) $260,000.

Question 69

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
________ for budgeting is the systematic varying of budget data input to determine the effects of each change on the budget.

A) Sensitivity analysis
B) What-if analysis
C) Strategic planning
D) Both a and b

Question 70

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
A prediction of sales under a given set of conditions is referred to as

A) a predicatory budget.
B) a sales budget.
C) a budget forecast.
D) a sales forecast.

Question 71

Crossley, Inc. has the following information:
Purchases are paid for in the following manner:
10 percent in the month of purchase
50 percent in the month after purchase
40 percent two months after purchase
The total cash disbursements in May for the purchase of merchandise should be

A) $138,400.
B) $148,580.
C) $ 69,200.
D) $128,160.

Question 72

Crossley, Inc. has the following information:
Purchases are paid for in the following manner:
10 percent in the month of purchase
50 percent in the month after purchase
40 percent two months after purchase
The cash disbursements in May for April purchases will be

A) $58,960.
B) $73,700.
C) $55,360.
D) $69,200.

Question 73

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
The total cash disbursements in November for the purchase of merchandise should be

A) $182,500.
B) $201,500.
C) $194,500.
D) $202,250.

Question 74

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
The cash disbursements in September for August purchases will be

A) $35,000.
B) $52,500.
C) $95,000.
D) $87,500.

Question 75

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
The collection of cash from customers would appear on which of the following?

A) Sales budget
B) Operating expense budget
C) Cash budget
D) None of the above

Question 76

Crossley, Inc. has the following information:
Purchases are paid for in the following manner:
10 percent in the month of purchase
50 percent in the month after purchase
40 percent two months after purchase
The total cash disbursements in March for the purchase of merchandise should be

A) $152,600.
B) $145,000.
C) $141,360.
D) $147,700.

Question 77

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
Which of the following factors would NOT be considered by sales forecasters?

A) Past patterns of sales
B) Estimates made by the sales force
C) General economic conditions
D) All of the above would be considered.

Question 78

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
The total cash disbursements in December for the purchase of merchandise should be

A) $202,500.
B) $230,000.
C) $ 46,000.
D) $184,000.

Question 79

Mickle Company has the following information:
Purchases are paid for in the following manner:
20 percent in the month of purchase
50 percent in the month after purchase
30 percent two months after purchase
An extremely powerful and flexible tool for budgeting is a(n)

A) spreadsheet.
B) budget model.
C) worksheet.
D) accounting model.

Question 80

Crossley, Inc. has the following information:
Purchases are paid for in the following manner:
10 percent in the month of purchase
50 percent in the month after purchase
40 percent two months after purchase
The cash disbursements in March for January purchases will be

A) $53,600.
B) $67,000.
C) $15,260.
D) $61,040.