Question 1

Which of the following statements is TRUE about the capital expenditures budget?
A) It includes the sales budget.
B) It is a part of the financial budget.
C) It must be completed before the cash budget can be prepared.
D) It must be completed before the budgeted income statement is prepared.

Accepted Answer

The capital expenditures budget must be completed before the cash budget can be prepared because it involves planning for significant investments in long-term assets, which affects cash flow projections.

Question 2

Which of the following statements is TRUE about the operating budget?
A) Its final component is the cash budget.
B) It includes the capital expenditures budget.
C) It includes the operating expenses budget.
D) It is a part of the financial budget.

Accepted Answer

The operating budget includes the operating expenses budget, which outlines the expected costs of running the organization during the budget period. The capital expenditures budget outlines planned investments in long-term assets, and the cash budget outlines expected inflows and outflows of cash. The operating budget is a component of the master budget, which also includes the financial budget (including the cash budget) and the capital expenditures budget.

Question 3

Caplico Company has prepared the following sales budget:
$$\begin{array} { | l | l | } 
\hline \text { Month } &  { \text { Budgeted sales } } \
\hline \text { March } & \$ 500,000 \
\hline \text { April } & 190,000 \
\hline \text { May } & 248,000 \
\hline \text { June } & 233,000 \
\hline
\end{array}$$
Cost of sales is budgeted at 50% of sales and the inventory at the end of February was $34,000.Desired inventory levels at the end of each month are 10% of the next month's cost of sales.What is the desired beginning inventory on 1 June?
A) $11,650
B) $23,300
C) $12,400
D) $112,000

Accepted Answer

The desired ending inventory for May is 10% of the cost of sales for June, which is 10% of $233,000 = $23,300. The desired beginning inventory for June is the desired ending inventory for May, which is $23,300.

Question 4

Kapital Ltd has prepared the operating budget for the first quarter of 2017.The company forecasts sales of $50,000 in January,$60,000 in February and $70,000 in March.Variable and fixed expenses are as follows:
Variable: electricity cost (40% of sales)
Miscellaneous expenses: (10% of sales)
Fixed: salary expense: $8000 per month
Rent expense: $4000 per month
Depreciation expense: $1200 per month
Electricity cost/fixed portion: $800 per month
Miscellaneous expenses/fixed portion: $1200 per month
Calculate total operating expenses for the month of January.
A) $40,200
B) $25,000
C) $50,200
D) $45,200

Accepted Answer

Variable expenses for January:Electricity cost (40% of sales) = $50,000 x 40% = $20,000Miscellaneous expenses (10% of sales) = $50,000 x 10% = $5,000Fixed expenses for January:Salary expense = $8,000Rent expense = $4,000Depreciation expense = $1,200Electricity cost/fixed portion = $800Miscellaneous expenses/fixed portion = $1,200Total operating expenses for January = Variable expenses + Fixed expenses= $20,000 + $5,000 + $8,000 + $4,000 + $1,200 + $800 + $1,200= $40,200

Question 5

The master budget includes three components-the operating budget,the capital expenditures budget and the financial budget.

Accepted Answer

The master budget includes the operating budget, capital expenditures budget, and financial budget.

Question 6

Budgeted financial statements are financial statements based on budgeted amounts rather than actual amounts.

Accepted Answer

Budgeted financial statements are prepared based on estimated amounts for a future period, rather than actual amounts from a past period. This allows businesses to plan and set goals for future financial performance.

Question 7

Which of the following describes the sales budget?
A) It aids in planning to ensure the company has adequate inventory on hand.
B) It represents a breakdown of total sales for each product by multiplying the price by the total projected units to be sold.
C) It helps in planning to ensure the business has adequate cash.
D) It captures the variable and fixed expenses of the business.

Accepted Answer

The sales budget represents a breakdown of total sales for each product by multiplying the price by the total projected units to be sold.

Question 8

The capital expenditures budget is part of the operating budget.

Accepted Answer

The capital expenditures budget is a separate budget from the operating budget, as it deals with long-term investments in fixed assets such as property, plant and equipment, and infrastructure. The operating budget, on the other hand, focuses on the day-to-day expenses and revenue of the business.

Question 9

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet.To provide the balance for the Cash account,which document should be used?
A) Cash budget
B) Sales budget
C) Inventory, purchases and cost of sales budget
D) Budgeted income statement

Accepted Answer

The Cash budget provides information on expected cash inflows and outflows during the budget period and is used to forecast the ending balance of the Cash account, which is necessary for preparing the budgeted balance sheet. The Sales budget, Inventory, Purchases and Cost of Sales budget, and Budgeted income statement provide information necessary for preparing the budgeted income statement and balance sheet, but they do not directly provide information on the ending balance of the Cash account.

Question 10

Which of the following describes the cash budget?
A) It helps in planning to ensure the business has adequate cash.
B) It aids in planning to ensure the company has adequate inventory on hand.
C) It captures the variable and fixed expenses of the business.
D) It depicts the breakdown of sales based on terms of collection.

Accepted Answer

The cash budget is a financial tool that analyzes the inflow and outflow of cash within a business over a specified period. It helps the company to identify potential gaps between cash inflows and outflows, thereby enabling the organization to plan adequately and ensure that it has adequate cash available to meet its obligations.

Question 11

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet.To provide the balance for Inventory,which document should be used?
A) Electricity and gas budget
B) Inventory, purchases and cost of sales budget
C) Cash budget
D) Budgeted cash collections

Accepted Answer

The Inventory, purchases and cost of sales budget would provide the balance for Inventory, as it outlines the expected inventory levels and the cost of purchasing inventory to meet sales demands. The other options (Electricity and gas budget, Cash budget, and Budgeted cash collections) do not directly relate to the inventory balance on the balance sheet.

Question 12

Which of the following statements is TRUE about the financial budget?
A) It includes the sales budget.
B) It must be completed before the budgeted income statement is prepared.
C) It includes the cash budget and the budgeted balance sheet.
D) It includes the capital expenditures budget.

Accepted Answer

The financial budget includes the cash budget and the budgeted balance sheet. The sales budget is a part of the operating budget, which feeds into the financial budget. The budgeted income statement is prepared using information from the financial budget, so it is completed after the financial budget. The capital expenditures budget is also a part of the financial budget.

Question 13

Which of the following describes the inventory,purchases,and cost of sales budget?
A) It helps in planning to ensure the business has adequate cash.
B) It captures the variable and fixed expenses of the business.
C) It depicts the breakdown of sales based on terms of collection.
D) It aids in planning to ensure the company has adequate inventory on hand.

Accepted Answer

The inventory, purchases, and cost of sales budget helps in planning to ensure the company has adequate inventory on hand.

Question 14

Which of the following describes the operating expenses budget?
A) It depicts the breakdown of sales based on terms of collection.
B) It captures the variable and fixed expenses of the business.
C) It helps in planning to ensure the business has adequate cash.
D) It aids in planning to ensure the company has adequate inventory on hand.

Accepted Answer

The operating expenses budget captures the variable and fixed expenses of the business, such as rent, salaries, utilities, and supplies. It is a detailed plan that outlines the expenses for the upcoming period and helps in managing the cash flow of the business. Option A refers to the accounts receivable budget, option C refers to the cash budget, and option D refers to the inventory budget.

Question 15

Budgeted operating expenses for the current year include the expiration of insurance that was paid for in a previous period.

Accepted Answer

If insurance was paid for in a previous period, then it would have been recognized as a prepaid expense at the time of payment. As the prepaid insurance expires, it becomes an operating expense in the current period. Thus, it would be included in the budgeted operating expenses for the current year.

Question 16

The capital expenditures budget stands alone and is not part of either the operating budget or the financial budget.

Accepted Answer

The capital expenditures budget is a separate budget from both the operating budget and the financial budget. It focuses on the acquisition of long-term assets and does not include day-to-day operational costs or financing activities.

Question 17

Freighters Ltd has the following budgeted figures:
$$\begin{array} { | l | l | l | l | l | } 
\hline & \text { January } & \text { February } & \text { March } & \text { April } \
\hline \text { Sales } & \$ 57,500 & \$ 63,000 & \$ 89,000 & \$ 94,000 \
\hline \text { Cost of sales } & 50 \% \text { of sales } & & & \
\hline \text { Required } & \$ 20,000 + 25 \% & & & \
\text { ending } &
\text { of next month's } \
\text { inventory }
&\text {sales} & & \
\hline \text { Inventory on } & & & & \
\text { hand on 1 Jan } & \$ 27,500 & & & \
\hline
\end{array}$$
Calculate the budgeted purchases for the month of January.
A) $37,000
B) $7000
C) $35,750
D) $64,500

Accepted Answer

Cost of sales for January = 50% of $57,500 = $28,750Required ending inventory for January = $20,000 + 25% of February sales = $20,000 + 25% of $63,000 = $31,500Budgeted purchases for January = Required ending inventory for January - Inventory on hand on 1 Jan = $31,500 - $27,500 = $4,000

Question 18

The financial budget includes all of the following,EXCEPT the:
A) budgeted income statement.
B) budgeted cash flow statement.
C) cash budget.
D) budgeted balance sheet.

Accepted Answer

The budgeted income statement is part of the operating budget, not the financial budget. The financial budget includes the budgeted cash flow statement, cash budget, and budgeted balance sheet.

Question 19

The production budget must be prepared before any other component of the operating budget.

Accepted Answer

The production budget is just one component of the operating budget and should be prepared after other components such as the sales budget and direct material budget have been prepared.

Question 20

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet.To provide the balance for Accounts receivable,which document should be used?
A) Cash budget
B) Inventory, purchases and cost of sales budget
C) Electricity and gas budget
D) Sales budget plus budgeted cash collections

Accepted Answer

The budgeted balance sheet requires accurate forecasting of all assets, liabilities and equity. Accounts receivable is an asset, therefore the best choice to determine the balance for Accounts receivable is by using the Sales budget plus budgeted cash collections. This will provide an estimate of how much cash is expected to be collected from credit sales, which can then be used to calculate the balance of accounts receivable. The cash budget, inventory, purchases and cost of sales budget, and electricity and gas budget do not directly provide information about accounts receivable.

Quiz 19: Introduction to Managerial Accounting and the Master Budget

Which of the following statements is TRUE about the capital expenditures budget?

Which of the following statements is TRUE about the operating budget?

The master budget includes three components-the operating budget,the capital expenditures budget and the financial budget.

Budgeted financial statements are financial statements based on budgeted amounts rather than actual amounts.

Which of the following describes the sales budget?

The capital expenditures budget is part of the operating budget.

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet.To provide the balance for the Cash account,which document should be used?

Which of the following describes the cash budget?

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet.To provide the balance for Inventory,which document should be used?

Which of the following statements is TRUE about the financial budget?

Which of the following describes the inventory,purchases,and cost of sales budget?

Which of the following describes the operating expenses budget?

Budgeted operating expenses for the current year include the expiration of insurance that was paid for in a previous period.

The capital expenditures budget stands alone and is not part of either the operating budget or the financial budget.

The financial budget includes all of the following,EXCEPT the:

The production budget must be prepared before any other component of the operating budget.

A company has prepared the operational budget and the cash budget and is now preparing the budgeted balance sheet.To provide the balance for Accounts receivable,which document should be used?