Question 1

The budgeted balance sheet assumes that all operating and financing plans are met.

Accepted Answer

The budgeted balance sheet is based on the assumption that all operating and financing plans are met according to the budget. It provides a snapshot of the company's financial position at a specific point in time based on the projected income and expenses, assets and liabilities as per the budget.

Question 2

If Division Inc. expects to sell 200,000 units in the current year, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for the year is 198,000 units.

Accepted Answer

The budgeted volume of production is calculated as follows: Expected sales + Desired ending inventory - Beginning inventory = 200,000 + 24,000 - 22,000 = 202,000 units.

Question 3

The sales budget is the starting point for preparation of the direct labor cost budget.

Accepted Answer

The answer of The sales budget is the starting point...

Question 4

Detailed supplemental schedules based on department responsibility are often prepared for major items in the operating expenses budget.

Accepted Answer

Supplemental schedules are often prepared based on department responsibility for major items in the operating expenses budget to provide more detailed information and breakdown of the expenses.

Question 5

Supervisor salaries and indirect factory wages would normally appear in the direct labor cost budget.

Accepted Answer

Supervisor salaries and indirect factory wages are not considered part of direct labor, but rather part of indirect labor or overhead expenses.

Question 6

The cash budget presents the expected inflow and outflow of cash for a specified period of time.

Accepted Answer

The statement is true. The cash budget is a financial statement that shows the expected cash inflows and outflows for a particular period of time, usually a month or a year. It helps organizations to manage their cash flow effectively and make informed decisions about their spending and investments.

Question 7

The budgeted direct materials purchases is based on the sum of (1) the materials needed for production and (2) the desired ending materials inventory, less (3) the estimated beginning materials inventory.

Accepted Answer

This statement accurately describes how the budgeted direct materials purchases are determined.

Question 8

The capital expenditures budget is part of the planned investing activities of a company.

Accepted Answer

The capital expenditures budget is used to plan and allocate funds for long-term investments in property, equipment, and other fixed assets. These investments are considered part of the planned investing activities of a company.

Question 9

The budget process involves doing all of the following except

Accepted Answer

The budget process involves establishing specific goals, executing plans to achieve the goals, and periodically comparing actual results with the goals. However, dismissing all managers who fail to achieve operational goals specified in the budget is not part of the budget process. While managers need to be held accountable for their performance, immediate dismissal may not always be the best solution and would not be a standard step in the budget process.

Question 10

If Division Inc. expects to sell 200,000 units in the current year, desires ending inventory of 24,000 units, and has 22,000 units on hand as of the beginning of the year, the budgeted volume of production for the year is 202,000 units.

Accepted Answer

To calculate the budgeted volume of production, we need to add expected sales to desired ending inventory and then subtract beginning inventory. So, the calculation would be: 
200,000 (expected sales) + 24,000 (desired ending inventory) - 22,000 (beginning inventory) = 202,000 units of production. Therefore, the answer is A.

Question 11

A formal written statement of management's plans for the future, expressed in financial terms, is a

Accepted Answer

A formal written statement of management's plans for the future, expressed in financial terms, is a budget. A gross profit report is a type of financial statement that shows the profit earned by a company after deducting the cost of goods sold. A responsibility report is a document that outlines the duties and responsibilities of various individuals or departments within an organization. A performance report is a document that evaluates the performance of an individual or organization against set goals and objectives.

Question 12

Supervisor salaries, maintenance, and indirect factory wages would normally appear in the factory overhead cost budget.

Accepted Answer

Supervisor salaries, maintenance, and indirect factory wages are considered indirect costs associated with operating the factory and are included in the factory overhead cost budget.

Question 13

The cash budget is affected by the sales budget, the various budgets for manufacturing costs and operating expenses, and the capital expenditures budget.

Accepted Answer

The sales budget, manufacturing costs budget, operating expenses budget, and capital expenditures budget all impact the cash budget, as they determine the inflows and outflows of cash in the business.

Question 14

The cash budget summarizes future plans for acquisition of fixed assets.

Accepted Answer

The cash budget summarizes future plans for cash inflows and outflows, including operating expenses and anticipated revenues, but not fixed asset acquisitions.

Question 15

The budgeted volume of production is normally computed as the sum of (1) the expected sales volume and (2) the desired ending inventory.

Accepted Answer

The answer of The budgeted volume of production is normally...

Question 16

The production budget is the starting point for preparation of the direct labor cost budget.

Accepted Answer

The production budget outlines the expected units to be produced for a given period, which is then used to determine the direct labor cost budget based on the number of hours needed per unit and the cost per hour of labor.

Question 17

The budgeted direct materials purchases is normally computed as the sum of (1) the materials for production and (2) the desired ending inventory.

Accepted Answer

The answer of The budgeted direct materials purchases is normally...

Question 18

Supervisor salaries, maintenance, and indirect factory wages would normally appear in the operating expenses budget.

Accepted Answer

The answer of Supervisor salaries, maintenance, and indirect factory wages...

Question 19

The budgetary unit of an organization which is led by a manager who has both the authority over and responsibility for the unit's performance is known as a

Accepted Answer

A responsibility center is a budgetary unit that is led by a manager who has both the authority over and responsibility for the unit's performance. The manager of a responsibility center is typically responsible for controlling costs, generating revenue, or both. They are held accountable for the results of their unit and are given the flexibility to make decisions that impact the unit's performance. Other answer choices are not commonly used terms to describe budgetary units within organizations.

Question 20

The capital expenditures budget details future plans for acquisition of fixed assets.

Accepted Answer

The capital expenditures budget outlines the plans and projections for investing in and acquiring fixed assets in the future.

Quiz 7: Budgeting