Deck 6: Mastering the Master Budget

Question 1

Jaco Ltd is involved in an incremental extension of their existing budget model. Which type of budget method should be used?

A) Imposed budget
B) Participative budget
C) Rolling budget
D) Zero-based budget

Answer 1

Rolling budget

Question 2

Jamie Lopez is the CEO of an exciting new solar-powered car manufacturer, SolCar Inc. Jamie shared a long-term vision and mission with the management team and now is expecting to see a detailed coordinated plan across all business units in the organization. Which of the following will provide Jamie with the needed information?

A) Master Budget
B) Pro forma (Budgeted) Balance Sheet
C) Pro forma (Budgeted) Income Statement
D) Tangible short-term objectives (Stretch goals) for the upcoming year

Answer 2

Master Budget

Question 3

Georgia has graduated now and has decided to repay all her debts so she can live debt-free. She owes some small-amount loans and some large-amount loans. Georgia chose to adopt the "Snowball Method" to reduce her debt. Which of the following statements is correct in the context of Georgia's strategy?

A) Georgia paid largest loan first.
B) Georgia paid smallest loan first.
C) Georgia paid the interest on all the loans first.
D) Georgia paid the minimum payments on each loan.

Answer 3

Georgia paid smallest loan first.

Question 4

Kevin is preparing the budgeted income statement for Nutshell Corp. for the upcoming month February and used the following information: Expected sales, $60,000; Expected cost of Goods Sold (COGS),50% of sales; and administrative expenses, $12,000. If Kevin has ignored all information from the previous month, which type of budget is Kevin using?

A) Imposed Budget
B) Participative budget
C) Rolling Budget
D) Zero-based Budget

Question 5

Two friends, Wei and Tee, are working as managers in two different organizations. Wei's job is to see that the budget that has been created and approved by top executives of the company is enacted. Tee's job is to see that the budget that has been created by all the managers of the organization and approved by higher authority is enacted. Which of the following statements is correct regarding Wei and Tee?

A) Wei uses a participative budget, while Tee uses a rolling budget.
B) Wei uses a participative budget, while Tee uses an imposed budget.
C) Wei uses a rolling budget, while Tee uses an imposed budget.
D) Wei uses an imposed budget, while Tee uses a participative budget.

Question 6

In the budgeting process, budgetary slack refers to the

A) practice of overestimating budgeted expenses and revenues.
B) practice of overestimating budgeted expenses and underestimating budgeted revenues.
C) practice of underestimating budgeted expenses and overestimating budgeted revenues.
D) practice of underestimating budgeted expenses and revenues.

Question 7

The maintenance department of an organization has been budgeted $500,000 for the current year's maintenance work. At the end of the fiscal year, the general ledger (or books) shows that they have only spent $450,000 on maintenance. To avoid being granted $450,000 the next year, the manager has decided to wastefully spend $50,000. This is an example of

A) budgetary slack.
B) imposed budget.
C) use-it-or-lose-it mentality.
D) zero-based budget.

Question 8

Mike, a grocery store owner, estimates that his profits in the next month will be $3,000. Based on his expectations, he prepares a budget and assigns $650 to savings, $500 to retirement benefits plan, $1,000 to personal expenses, and decides to spend $850 for the expansion of his grocery store. Which type of budget did Mike use?

A) Imposed Budget
B) Participative budget
C) Rolling Budget
D) Zero-based Budget

Question 9

Mallards Manufacturing's budget for the next year is due by October 31. Prem Patel, the head of the purchasing department, received an Excel file with the previous year's and current year's departmental costs. Prem has been asked to use the information to create a budget for the next year. A meeting with department supervisors has been scheduled to discuss the data before the workbook is completed. Mallards Manufacturing's budget is a ___ budget.

A) imposed
B) participative
C) rolling
D) zero-based

Question 10

All of the following are advantages of budgeting except

A) Budgeting improves communication within the organization.
B) Budgeting improves coordination among departments.
C) Budgeting instills a use-it-or-lose-it mindset among the managers.
D) Budgeting provides the basis for evaluating employee performance.

Question 11

Lara, a manager in the treasury department, has prepared a budget that updates the current month's budgeted ending balance to the actual end-of-month information. Lara has created a(n)

A) imposed budget.
B) participative budget.
C) rolling budget.
D) zero-based budget.

Question 12

Sara has realized her dream and is now working full-time as a nature photographer. Sara works 35 hours per week and has a monthly cash inflow from wages of $3,500 (net after taxes). Sara is working on a zero-based budget for January and expects to have a cash outflow of $1,800 per month for rent, $100 per week for groceries (assume 4 weeks in the month), and $850 for other miscellaneous expenses. Sara is saving the remaining amount for a new digital camera, and it is really important to keep saving for that, no matter what. Unfortunately, Sara just found out that monthly rent is going to increase by $300 starting in January. Which of the following is the best course of action for Sara to take revise their personal monthly budget?

A) Increase savings for the digital camera by $100 per month
B) Increase the number of hours worked by 12 hours per month
C) Lower grocery expenses by $25 per week
D) Lower monthly miscellaneous expenses by $250

Question 13

Patrick prepared a production budget for a 6-month period for Hshell Corporation (or Inc.) At the end of the current month, Patrick revises the budgeted beginning inventory of the next month with an actual ending inventory of the current month. Which type of budget Patrick using?

A) Imposed Budget
B) Participative budget
C) Rolling Budget
D) Zero-based Budget

Question 14

Tran has worked for West End Manufacturing for the last three years as production manager for the company's skateboard assembly line. He was recently promoted to plant manager. He received the next year's budget from finance. In reviewing the budget, he noticed that there is not any money budgeted for a new piece of equipment he wants to buy to speed up the skateboard assembly line. When he asks about adding money to the budget for the new piece of equipment, he is told that budget cannot be changed. Which of the following is true?

A) Because Tran cannot change the budget, West Manufacturing is using an imposed budget.
B) By identifying new equipment for the production line, West End Manufacturing is using a participative budget.
C) Tran will need to balance revenues with expenses before he can change the budget.
D) Tran will need to update the previous period's balances before he can change the budget.

Question 15

Juwan is updating the budget for Pittman's Cycle Shop. His manager has told him that a new piece of equipment has been purchased with a monthly loan payment of $123.50 for the next six months. Juwan completes the new budget by reviewing the budgeted amounts in different categories so that both budgeted revenue and budgeted expenses balance. Which of the following can be said about Pittman's Cycle Shop?

A) Juwan must update the actual ending balances from the previous period before he can complete the budget.
B) Pittman's Cycle Shop is using a rolling budget.
C) Pittman's Cycle Shop is using a zero-based budget.
D) Since Juwan is adding the monthly loan payment to the budget, the budget is considered a participative budget.

Question 16

Cade is promoted to plant manager at Mallards Manufacturing. It is his first time having to create a budget. He reviews the budget for the previous year and compares it to the actuals for the same time period. He then creates a budget for the next year using his knowledge of what he needs. When he submits the budget to finance, he is told that he should update the last closed period with actuals and then create a budget for the next two years. Which of the following is true?

A) Because Cade was told by finance that he had to change his budget, he is working with an imposed budget.
B) Cade is working with a rolling budget at Mallards Manufacturing.
C) The new budget that Cade will create will be less realistic than the original budget.
D) The new budget will have slack built into because the actuals are being used for the last current period.

Question 17

Mayco Manufacturing has multiple manufacturing plants throughout the southeastern United States. Once a year, the plant managers meet in the corporate headquarters where they are given their budgets for the next year. After the budgets are reviewed, the plant managers use the budgets to plan the next year at their respective plants. Which of the following can be said about Mayco Manufacturing?

A) By allowing the plant managers to review the budgets, Mayco is using a participative budget.
B) By not allowing the plant managers to have input to their budgets, it can be said that the plant managers are working with imposed budgets.
C) Once back at the plant, the plant manager will ensure that the inflow of cash and the outflow of cash balance.
D) When the plant manager gets back to his plant, they will add anything they think is missing before applying the budget to their plant's budget for the next year.

Question 18

Rashad was excited to be going to work for a What's What retail store. On his first day at the store, he attended a meeting with the store manager and all the other employees. The purpose of the meeting was for the manager to present the budget for the next year. Several of the employees suggested changes to some of the categories that would incur additional expenditures but would improve worker productivity. After a discussion, the store manager agreed to adopt the changes. Which of the following can be said about this What's What store's budgeting process?

A) Because some of the categories were changed, the manager will have to review the budget in order to balance the revenues and the expenditures.
B) By accepting suggestions that will affect the budget from the employees, the store manager is developing a participative budget.
C) The budget for the store is a rolling budget because the store manager is updating using employee suggestions.
D) This What's What retail store is using an imposed budget because the store manager presented the budget.

Question 19

Juwan is updating the budget for Pittman's Cycle Shop. His manager has told him that a new piece of equipment has been purchased with a monthly loan payment of $123.50 for the next six months. Juwan adds the new payment to the budget and returns the budget to his boss, Laura. Laura tells him that he cannot just add the new expense, but that instead he must review the budgeted amounts in different categories so that both budgeted revenue and budgeted expenses balance. Which of the following is true?

A) Laura is explaining how a zero-based budget is developed.
B) Pittman's Cycle Shop is using a participative budget.
C) The addition of a new payment has caused Juwan to use an imposed budget.
D) The budget for Pittman's Cycle Shop will be more realistic because of the changes Juwan will make.

Question 20

At the end of the year, each of the department heads is provided with a report that shows their actual expenditures compared to the budgeted amounts the departments heads submitted during the budgeting process. Tu was excited to see he was 15% under budget which meant he would get a bonus. Several of the other department heads asked how he always seems to earn the bonus. One explanation for his success could be

A) he adds an extra 15% above what he thinks he will spend in his budget numbers.
B) he submits a budget number less than he thinks he will spend.
C) he uses the use-it-or-lose-it philosophy when creating his budget.
D) management cut his budget after he submitted it.

Question 21

While preforming an internal audit at a production plant, the auditor notices there are a significant number of end-of-the-year purchases that the auditor cannot explain. The auditor reviewed the previous year and found a similar situation. The auditor begins to think the plant is using a _____ budgeting method.

A) budgetary slack
B) cost plus
C) flexible
D) use-it-or-lose-it

Question 22

Mallards Manufacturing's budget for the next year is due by October 31 of the current one. Emma, the head of the production department, received an Excel file with the previous year and current year costs for her department. Emma has been asked to use the information to create the budget for the department for next year. Emma met with the department supervisors to get their input on the budget. After she met with the supervisors, she added an additional 10% to each of the categories before submitting the budget to finance. This budgeting method could be described as a(n)

A) imposed budget using use-it-or-lose-it method.
B) imposed budget with slack.
C) participative budget using use-it-or-lose-it method.
D) participative budget with slack.

Question 23

John, the production supervisor at Walrus Ball Caps, is reviewing his monthly actual expenses versus budget expenses for his production line. He needs to provide finance with his budget for next year. He notices he is significantly under budget in the supplies category. To ensure his budget does not get reduced for the next year, he has the purchasing agent order enough supplies to bring the category to close to the budget. This budgeting method could be described as a(n)

A) imposed budget using the use-it-or-lose-it method.
B) imposed budget with slack.
C) participative budget using the use-it-or-lose-it method.
D) participative budget with slack.

Question 24

Juwan is updating the budget for Pittman's Cycle Shop. His manager has told him that a new piece of equipment has been purchased with a monthly loan payment of $123.50 for the next six months. Juwan adds the new payment to the budget and returns the budget to his boss, Laura. Laura tells him that he cannot just add the new expense, but that instead he needs to review/adjust budgeted amounts in each category so that the inflow minus the outflow equal zero. Juwan updates the budget and sends it to Laura. Laura adds an additional 15% to each category before submitting the budget to finance. This an example of a(n)

A) imposed budget using the use-it-or-lose-it method.
B) participative budget using slack.
C) rolling budget using the use-it-or-lose-it method.
D) zero-based budget using slack.

Question 25

Casey's Boardshorts Store's manager, Rashad, had an unexpected cleaning expense when a water pipe burst in the ceiling. At the end of each month, any unexpected expenses are added to the budget, and other categories are updated with the actual expenditures before the new budget is created. Casey's Boardshorts Store's budget is a(n) ___ budget.

A) imposed
B) participative
C) rolling
D) zero-based

Question 26

Trayvon, a supervisor at Mayco Manufacturing, was discussing issues in his production area with the plant manager. Trayvon suggested that changes to the flow of materials would increase productivity but would cost about $50,000. As the plant manager was in the process of updating his budget for the next year, he added $50,000 for the changes to the proposed budget. This is an example of a(n) ______ budget.

A) imposed
B) participative
C) rolling
D) zero-based

Question 27

Alios recently changed jobs to become the Southeast sales manager for Waycom Electronics. He previously worked for Marcom. His first month with company, he received a budget that reflected his sales goals for the next year. This surprised him because he had always developed his sales revenue goals for the next year. When he questioned the VP of Sales at Waycom, he was told that that was not part of his responsibility at Waycom. Which of the following is true?

A) Marcom was using a participative budget, and Waycom is using an imposed budget.
B) Marcom was using an imposed budget, and Waycom is using a zero-based budget.
C) Waycom is using a rolling budget, and Marcom was using a participative budget.
D) Waycom is using a rolling budget, and Marcom was using an imposed budget.

Question 28

Carolyn was recently hired at Thermo Chocolate Company in the role as internal auditor. To acquaint herself with company's budgeting process, she reviews the last three years Actual versus Budget reports. She notices that one of the managers seem to always spend what he budgeted even when there are significant changes to revenues. Other managers seem to have more significant differences as she what have expected given the changes in revenue. The auditor begins to think the manager is

A) using a flexible budget that makes it easier to make his budget.
B) using a use-it-or-lose-it budgetary method to ensure his budget is not cut in the next year.
C) using budgetary slack to make his budgets.
D) using cost plus to make his budget.

Question 29

Macda is responsible for determining how to bring a new product to market. He has considered manufacturing it in the southeast but decides to have it produced in the northeast because a critical raw material is manufactured near that plant and would be easier to source from there. This planning would be considered during the ________ step of strategic planning.

A) goals and objectives
B) measures and targets
C) mission and vision
D) strategies and initiatives

Question 30

Arrange the following steps in the correct order with reference to the strategic planning process:
1) Goals and objectives
2) Measures and targets
3) Results
4) Strategies and initiatives
5) Mission and vision

A) 5, 1, 4, 2, and 3
B) 1, 4, 2, 3, and 5
C) 5, 1, 2, 4, and 3
D) 1, 2, 3, 4, and 5

Question 31

Which of the following statements is correct in the context of centralization?

A) Centralization creates accountability and responsibility among the employees.
B) Centralization improves managers' performances.
C) Decisions are made at all levels of an organization.
D) Decisions are made at the highest level of an organization.

Question 32

TWV is successful marketing company. In an interview, the company's CEO agreed that shifting the authority for some types of decision making to lower levels in the organization plays a main role in the company's overall success. What kind of organizational structure is TVW using?

A) Centralized structure
B) Decentralized structure
C) Flat structure
D) Tall structure

Question 33

Walrus Ball Caps had a great year in sales, resulting in greater profits than were planned. The company has decided to use some of these profits to replace aging equipment. Jun was told to come up with a proposal that would spend $150,000 on replacement equipment. Which of the following is true?

A) Because Jun was responsible for investing the $150,000 on long-term assets, he would be responsible for an investment center.
B) Because profits increased, costs must have been controlled. Jun must therefore have responsibility for a cost center.
C) The $150,000 that Jun was responsible for spending was the result of increased sales. This would mean he has responsibility for a revenue center.
D) The $150,000 that Jun was responsible for spending was the result of increased profits. This would mean he has responsibility for a profit center.

Question 34

Organizational structure and budgets are linked together. What type of budget is most commonly used in decentralized organizations?

A) Imposed Budget
B) Participative budget
C) Rolling Budget
D) Zero-based Budget

Question 35

Santiago, one of the accountants for a company, was reviewing the direct materials purchases budget for the production line and noticed a 15% increase in the budget compared to the prior period budget. What could have caused the increase in the direct materials purchases budget, and who should he talk to about the cause?

A) The increase in the direct materials purchases budget could have been caused by an increase in production direct labor costs, and he should talk to the production manager who prepared the budget.
B) The increase in the direct materials purchases budget could have been caused by an increase in manufacturing overhead costs, and he should talk to the plant manager who provided the budget.
C) The increase in the direct materials purchases budget could have been caused by a decrease in the quantity of the direct materials needed, and he should talk to the production manager who prepared the budget.
D) The increase in the direct materials purchasing budget could have been caused by an increase in the purchasing price, and he should talk to the purchasing manager who provided the budget.

Question 36

Eatsy manufacturing creates a master budget that includes budgets for each of the responsibility centers of the company using input from the person responsible for each center. Decision-making responsibility is given to each of the managers of their responsibility centers. Manuel is a production supervisor responsible for managing the packaging line that produces organic food bars. Each month, he gets a report that shows the expenditures for his line and is responsible for explaining any major discrepancies. What type of organizational structure does Eatsy use, and what kind of responsibility center does Manual manage?

A) Easty has a centralized organizational structure and Manuel manages an investment center.
B) Easty has a centralized organizational structure and Manuel manages a revenue center.
C) Easty has a decentralized organizational structure and Manuel manages a profit center.
D) Easty has a decentralized organizational structure and Manuel manages a cost center.

Question 37

Bylue Inc. has set a long-term plan to increase production by 100% over the next five years. Jose uses this information to set up a purchase plan for new equipment for the next year that will allow an increase in production of up to 20% in the next year on the way to the 100% increase by year five. Which of the following is true?

A) The 100% increase in production would have been reflected in the next year's master budget affecting the manufacturing costs.
B) The purchase of new equipment would have been identified in the mission and vision step of the strategic planning process.
C) The purchase plan for new equipment would have been identified during the strategies and initiatives step of the strategic planning process.
D) The purchase plan was a short-term objective that was created during the goals and objectives step to support the long-term goal of 100% increase in production.

Question 38

Henry manages the working capital, debts, stocks, plant, and machinery of the organization. Which responsibility center is managed by Henry?

A) Cost Center
B) Investment Center
C) Profit Center
D) Revenue Center

Question 39

Mallards Manufacturing's senior executives meet once a year to discuss where the company is going and what changes need to be made to get there. This may include adding new product lines or discontinuing existing lines. It might also include plans for new plants and sales offices. What are the expected results of this meeting?

A) A mission statement and vision statement(s) were created.
B) A set of goals and objectives were created that will be used to create the budget.
C) A set of strategies and initiatives were written that will be used to create the company's budget.
D) Measures and targets were developed to be used in employee reviews.

Question 40

In 2015, Hanson Services set a vision of entering a new area of business that would increase revenue by 25% over the next five years. The end of the year, reports for 2020 show that Hanson was successful in entering the new area of business and that they had increased revenue by 30% as a result. Given that the vision has been accomplished, what would Hanson Services need to do before they can create a master budget for the next year?

A) Hanson Services would simply update the new sales budget for the next year.
B) Hanson Services would need to decide where it wants to go next and update its mission and vision statements to reflect their new purpose and destination.
C) Hanson Services would not need to make any changes.
D) Hanson Services would update the measures and targets to reflect the 30% increase in revenue.

Question 41

The new year has begun, and Casey has received the first month's actual expenditures. In reviewing the data provided, she realizes the key performance indicators (KPIs) set by the master budget for labor overtime has been exceeded. She asks for a detailed report of transactions that were used to calculate the KPIs. The data she was provided came from the

A) actual labor hours reported by the employees.
B) master budget numbers developed for the current year.
C) objectives set by the company during the strategic planning process.
D) techniques that were chosen to support the strategies adopted by the company.

Question 42

Aibir is preparing for his annual review with the VP. He has spent the last week reviewing the monthly reports focusing on sales made by his sales representatives. Overall, he thinks he is in a good position as he has made 103% of his key performance indicators (KPIs) for sales, and his expenses are within 1.5% of the budget. During the meeting, the VP comments that Aibir's sales numbers are good and he is happy with the expense management. What kind of responsibility center is Aibir's department?

A) The department is a cost center because Aibir is only responsible for expenses.
B) The department is a profit center because Aibir is responsible for generating sales revenues and maintaining expenses.
C) The department is a revenue center because Aibir is only concerned with sales.
D) The department is an investment center because Aibir is reviewing the monthly reports.

Question 43

Gabriel has worked for Cartoon Express Manufacturing for the last three years as warehouse manager for the company's distribution center. He received next year's budget from finance, and in reviewing the budget, he noticed that there was not any money for a new piece of equipment that he wants to buy to improve stocking shelves in the warehouse. Gabriel makes a change to include the equipment purchase in his budget and sends it back to finance. The budget was returned to him without the new equipment and with a note from finance that told him additions to the budget are made by headquarters, and he cannot change the budget. Which of the following is true?

A) Cartoon Express Manufacturing is a centralized decision-making organization that uses a rolling budget.
B) Cartoon Express Manufacturing is a centralized decision-making organization that uses an imposed budget.
C) Cartoon Express Manufacturing is a decentralized decision-making organization that uses an imposed budget.
D) Cartoon Express Manufacturing is a decentralized decision-making organization that uses a rolling budget.

Question 44

Johnson Retail has seven stores located throughout the state of Vermont. Once a year, store managers meet in the corporate headquarters where they are given their budgets that were created by finance for the next year. Over the course of that week, finance presents the budgets for each store allowing store managers to ask questions about their budget and to make changes to their budgets. Which of the following is true?

A) Johnson Retail is a centralized decision-making organization that uses a rolling budget.
B) Johnson Retail is a centralized decision-making organization that uses a participative budget.
C) Johnson Retail is a decentralized decision-making organization that uses a rolling budget.
D) Johnson Retail is a decentralized decision-making organization that uses a participative budget.

Question 45

Victoria, a supervisor at Wholesale Foods, was in meeting with her manager discussing issues in the production area. Victoria suggested that changes to the flow of materials would increase productivity but would cost about $105,000 in new equipment. As the plant manager was in the process of updating his budget for the next year, he changed the budget to add $105,000 for the purchase of new equipment. What kind of organizational structure and budget type is described above?

A) Victoria works for a company that has a centralized organizational structure and uses a rolling budget type.
B) Victoria works for a company that has a centralized organizational structure and uses an imposed budget type.
C) Victoria works for a company that has a decentralized organizational structure and uses a zero-based budget type.
D) Victoria works for a company that has a decentralized organizational structure and uses a participative budget type.

Question 46

Binita had recently gone to work for Augustine Services as a division manager. She was told she would receive the next year's budget in few weeks. After receiving the budget, she suggested some additional changes to expenses for supplies. Finance told her she could make the changes but would need to balance revenues with expenses. Augustine Services has a(n) ______ budget in a _______ organization structure?

A) imposed, decentralized
B) participative, centralized
C) rolling, centralized
D) zero-based, decentralized

Question 47

Jessica has just launched an online store where she will be selling high-end pet apparel. She wants to start this business off on the right foot and is creating a Cost of Goods Sold Budget for the month of September of this year. She has gathered as much information as possible and is ready to get to work. She made her first purchase last month in the amount of $165 but did not have any sales. She will be purchasing 500 units from a supplier with a price of $2.48 per unit. She believes she will end the month with Merchandise Inventory in the amount of $120. How much will Jessica's Cost of Goods Sold Budget be for September?

A) $165
B) $1,120
C) $1,285
D) $1,525

Question 48

Jenson is in the furniture business. He observed increasing demand for office chairs, and strongly anticipates even better results in the next quarter. Jenson decides to reconsider his production plans, and he comes up with the following production budget for the second quarter:
Jenson determines that every unit needs 2 hours of direct labor (DL) time. He pays $20 per hour to his daily wage workers. Considering the given information, which of the following is correct?

A) For the second quarter, total DL hours and total DL cost will be 1,200 and $24,000 respectively.
B) For the second quarter, total DL hours and total DL cost will be 3,920 and $78,400 respectively.
C) For the second quarter, total DL hours and total DL cost will be 1,320 and $26,400 respectively.
D) For the second quarter, total DL hours and total DL cost will be 3,960 and $77,600 respectively.

Question 49

Chaitanya, the purchasing manager of direct materials at AirFun, was reviewing the budgeted balance sheet for the upcoming year. She noticed that the accounts payable account for direct materials had increased significantly. She needs to understand what caused the increase. She should find the cause of the increase _____ and could get an explanation from _______.

A) on the budgeted balance sheet under Direct Material Inventory balance, the CFO about the reason for the increase
B) on the budgeted cash flow statement under the Operating Activities section, the plant manager about the reason for the increase
C) on the budgeted income statement under Sales, the VP of Sales about the reason for the increase
D) on the Direct Materials Purchases budget, the plant manager about the reason for the increase

Question 50

XYZ Company produces and sells chairs. Quarterly budgeted sales are as follows:
Quarter 1 4,500
Quarter 2 5,000
Quarter 3 3,000
Quarter 4 4,800
The ending inventory of finished goods (FG) for a given quarter includes 5% of the next quarter's budgeted sales. Calculate the budgeted units to be produced for Quarter 3.

A) 3,090
B) 4,525
C) 4,560
D) 4,900

Question 51

AP Corp is a well-known name for producing the best quality hammers in the town. Dmitri, a manager in the firm, wants to know the maximum production capacity possible within the budgeted amount. It requires 12 minutes of direct labor (DL) time to manufacture 1 hammer, and the hourly wage rate of direct labor is $11. Help Dmitri calculate the number of hammers that can be produced if the management approves a budget of $19,800 for direct labor.

A) 3,630 units
B) 3,960 units
C) 9,000 units
D) 9,900 units

Question 52

Dave, the owner of Dave's Doughnuts, has prepared an operating budget that shows the following data for the quarter ended March 31:
The sales price of each doughnut is $4.75, and the cost to produce each doughnut is $3.10. The company's tax rate is 30%. Based on this information, what amount would Dave's budgeted income statement show for net income? Round all calculations to two decimal places.

A) $1,670.37
B) $2,386.25
C) $2,886.25
D) $7,136.25

Question 53

Peter, a part-time intern in an enterprise, estimates that budgeted units of production for the next month need to be 5,000 units to achieve the targeted sales. The production of one unit requires 0.30 direct labor (DL) hours, and the hourly rate of labor is $10. Based on the given data, the total budgeted DL hours required and total budgeted DL cost are

A) 1,000 and $15,000 respectively.
B) 1,500 and $15,000 respectively.
C) 1,500 and $22,500 respectively.
D) 5,000 and $10,000 respectively.

Question 54

XYZ Company produces and sells chairs. Monthly budgeted sales are as follows:
June 450
July 500
August 300
September 480
October 430
The ending inventory of finished goods is 5% of the next month's budgeted sales. 10% of sales are budgeted as cash sales and the remaining sales are budgeted as credit sales. According to the company records, 40% of credit sales are collected in the same month, 35% are collected in the next month, 22% are collected two months after the sale, and remaining are uncollectible. If company is selling 1 chair for $150, then calculate total cash received in September.

A) $55,762
B) $57,690
C) $61,260
D) $62,145

Question 55

Aclass Technology is currently selling 20,000 tablets per year. The company is expecting to increase their tablet sales by 20% in the next year with a new marketing strategy. At a price-per-tablet of $350, how much in budgeted sales revenue should the company expect?

A) $1.4 million
B) $5.6 million
C) $7 million
D) $8.4 million

Question 56

Joycups is currently manufacturing ice-cream cones. The company requires 7 minutes of direct labor (DL) time to manufacture 1 cone, and the direct labor rate is $12 per hour. What is the total budgeted DL cost to produce 5,000 cones? (Do not round values during intermediate calculations.)

A) $4,200
B) $5,000
C) $7,000
D) $8,571

Question 57

If Mia charged $450 for the services provided to Olivia and Olivia used her credit card to pay her bill, how Mia would record this transaction?

A) Debit the Cash account for the amount of sale - Amount of merchant fees; Debit the Merchant Fees Expense account for the amount of fees; and Credit the Sales account for the total amount of the sale
B) Debit the Cash account for the amount of the sale; Credit the Merchant Fees Expense account for the amount of the fees; and Credit the Sales account for the amount of the sale - the amount of the merchant fees
C) Debit the Sales account for the amount of the sale; Credit the Cash account for the amount of the sale - the amount of the merchant fees; and Credit the Merchant Fees Expense account for the amount of the fees
D) No entry

Question 58

Rose Bags Company plans to sell 8,000 bags in April and expects a growth rate in sales of 5% per month. The monthly target ending finished goods (FG) inventory (in bags) is 20% of the next month's planned sales. There are 2,000 bags in inventory on March 31. The number of budgeted units (in bags) to be produced in April is

A) 6,000 bags.
B) 7,680 bags.
C) 8,320 bags.
D) 9,680 bags.

Question 59

Fedrick, of Zenith Bakery, estimates the sale of 180 cookies and the production of 200 cookies for January. Each cookie requires 10 grams of flour and costs $0.2 per gram. Budgeted ending flour requirement is estimated to be 500 grams and beginning flour inventory is 200 grams. How much flour needs to be purchased, and how much will it cost?

A) 1,700 grams, $340
B) 2,700 grams, $540
C) 2,300 grams, $460
D) 2,000 grams, $400

Question 60

Starfish Candy Manufacturing Inc. makes and distributes uniquely flavored candy to major retailers across the US (seaweed-turmeric taffy, anyone?). Premium candy costs $2 per piece and regular candy costs $1 per piece. The marketing and sales department projects credit and cash sales volume for the month of March as follows:
What is the total budgeted gross sales for March?

A) $450
B) $500
C) $575
D) $800

Question 61

Home Furniture Inc. expects to produce 5,000 finished goods (FG) units (in tables) in October and 5,500 FG units (in tables) in November. Each table needs 2 meters of direct material (DM) in wood that costs $5 (per meter of wood). Target ending DM inventory is 10% of the next month's total production needs in DM (meters of wood). There is DM of 600 meters of wood in inventory on September 30. Total budgeted cost of DM purchases of wood during October will be

A) $9,500.
B) $10,500.
C) $52,000.
D) $52,500.

Question 62

From Pickwell's sales budget, the budgeted sales volume for the month of January and February is 25,000 units and 35,000 units respectively. Sam, the production head of the Pickwell, decided that the ending inventory quantity should be 10% of the next month's sale. Based on the given information, how many units are expected to be produced in January?

A) 22,500 units
B) 24,000 units
C) 26,000 units
D) 28,500 units

Question 63

Mia is working on her department's budgeted annual income statement. In the process, she needs to determine the budgeted amount for selling, general, and administrative (SG&A) expenses in order to complete her budget.
On the basis of the given data, what are total budgeted selling, general, and administrative (SG&A) expenses of the department?

A) $16,400
B) $33,400
C) $35,400
D) $41,400

Question 64

Darius is a factory supervisor, and he is currently preparing the production budget for the next quarter. The following production budget was in place for the current quarter of the year:
Darius anticipates that in the first, second, and third month of the next quarter, production will increase by 5%, 7%, and 8%, respectively, compared to the previous month's production. If every unit needs 2.5 hours of direct labor (DL) time and the hourly wage rate is $15 per hour, than what will the total number of budgeted production units, the total number of direct labor hours, and the total direct labor cost for the next quarter be (Round your calculations to the nearest whole number amounts)?

A) Total budgeted production units: 1,960; Total DL hours: 4,900; Total DL cost: $73,500
B) Total budgeted production units: 2,092; Total DL hours: 5,230; Total DL cost: $78,450
C) Total budgeted production units: 2,370; Total DL hours: 5,925; Total DL cost: $88,875
D) Total budgeted production units: 6,638; Total DL hours: 16,595; Total DL cost: $248,925

Question 65

Sue works in a company that manufactures shirts for school uniforms. For the past two years, she has been handling the production department's budgets for the company. The company has a policy to stock 10% of next month's sales in finished goods (FG) inventory and 20% of direct material inventory from the next month's direct materials (DM) requirement. The following production budget was in place for the current quarter of the year.
Assume that the quantity of direct material required is 2 meters of cloth for one shirt and the direct material cost per meter is $1.50. Help Sue calculate the total budgeted cost of ending DM inventory for the month of November.

A) 1,257
B) 1,350
C) 6,285
D) 6,750

Question 66

Jack is preparing the production budget for Candy Cane Corporation (CCC). Jack determines that the production department generally holds 20% of the following month's budgeted sales in ending inventory each month. From the sales and marketing department, Jack learned that budgeted unit sales for the next 3 months are: January; 1,000 units, February; 1,500 units, and March; 2,500 units. How many units should Jack have the production department produce in February?

A) 1,100 units
B) 1,700 units
C) 2,000 units
D) 3,300 units

Question 67

Sheer, an accountant at a Trader Joe's store, is working on the cost of goods sold (COGS) budget. He extracts some data from the purchase budget to complete the COGS budget. Based on the purchasing budget, the budgeted beginning and the ending finished goods inventories are 170 and 200 units respectively, and the budgeted purchases are 540 units at $4.30 per unit. What will the expected COGS be for the month of August?

A) $2,193
B) $2,451
C) $2,800
D) $2,913

Question 68

AXN Corporation is a well-known name in the production of high-quality metal boxes. The VP of store operations has asked the sales manager to provide him the sales forecasts for the third quarter of the year. The sales manager, Kevin, has provided him the following information:
What will the budgeted gross sales be for the third quarter of the year?

A) $16,000
B) $18,288
C) $53,000
D) $53,668

Question 69

July, the current operating month of XBL Corporation has reported less production, and it is determined that this month will end with more raw material inventory than budgeted. Based on the records, July's ending raw materials inventory will be 560 kilograms. The head of finance for the company has asked Joshua, the head of the purchasing department, to submit the department's direct materials purchases budget for August 2021. From the production budget, Joshua saw that budgeted production for August is determined to be 750 units, and that it would require 6 kilograms of raw material to produce one unit. The Company has a policy of maintaining a safety stock of 450 kilograms of raw material, and one kilogram of raw material costs the company $8. What will the budgeted cost of direct material (DM) to be purchased be for August 2021?

A) $4,390
B) $6,000
C) $35,120
D) $36,000

Question 70

The head of finance for Squish Corporation wants to know the expected manufacturing variable overhead cost for the third quarter of this year. In the second quarter, the company reported the manufacturing of 7,000 units and a total variable manufacturing overhead of $56,000. In addition to this, the production department has provided him the details below:
On the basis of the data above, what will the total variable manufacturing overhead cost of the third quarter of the year be?

A) $3,600
B) $11,000
C) $11,280
D) $56,000

Question 71

NBN Corporation has planned to produce 7,000 units each of NPS 1 (length 12 meters) and NPS 3 (length 12 meters) steel pipes in the month of August. It is estimated that it will takes 3 hours to produce each type of pipe. The following table provides the additional information on this:
If the expected rate for direct labor is $15 per hour, then the total expected direct labor cost for August will be

A) $84,000.
B) $105,000.
C) $315,000.
D) $630,000.

Question 72

Mallards Manufacturing produces waterproof tarps for camping, and the company has been in business since 1955. The following budget information has been provided for the 2024 production year:
What is the budgeted quantity of direct materials to be purchased?

A) 65,998
B) 122,247
C) 178,500
D) 209,749

Question 73

Forecasted sales of Great Inc. for Quarter 1 (January / February / March) are 2,580 units, 2,780 units, 2,900 units respectively. Budgeted sales for the month of April are 3,000 units. The company has a target policy to hold ending inventory equal to 20% of the forecasted sales for next month. You are required to calculate the total units produced during Quarter 1 of the year.

A) 8,344 units
B) 8,433 units
C) 8,434 units
D) 8,443 units

Question 74

ASF Corporation is manufacturing three types of products, namely L, M, and N, and is currently in process of reviewing the quarterly budgets for its products. Quarterly budgets for the company show that there are two different cash costs of manufacturing overhead (MOH) reported by the production head and the cost accountant for product M. Based on this information, the head of production has decided to reconsider all the available information and resubmit his budget. He has taken the following information to determine the budgeted cash cost of manufacturing overhead:
Based on your calculation, the budgeted cash cost of MOH for product M reported by the production head should be

A) $26,800.
B) $27,000.
C) $29,700.
D) $281,400.

Question 75

Ley Corporation, a producer of paper bags, hires Zoey as a finance intern. As an intern, Zoey is tasked with collecting and comparing actual financial data with budgets. In the process, Zoey found that company neglected to plan for manufacturing overhead costs. Zoey's manager provided the following information, and asked her to prepare the manufacturing overhead budget:
If the company has a policy of maintaining zero work-in-progress, then what manufacturing overhead cost will Zoey calculate based on the information she was given?

A) $114 million
B) $190 million
C) $228 million
D) $418 million

Question 76

Ashley, a student in a cost accounting course, gets an assignment to submit by end of the day. He is stuck in the calculation of the budgeted cost of manufacturing overhead and anxiously asks for your help. Ashley provided you with the following information and is looking forward to getting a timely response from you.
You assist Ashley with the calculation and conclude that the total budgeted manufacturing overhead costs equal

A) $15,000.
B) $289,000.
C) $291,000.
D) $295,000.

Question 77

Joseph is calculating the budgeted cost of goods sold for Landes Inc., a manufacturer of leather bags, to verify their sales revenue. From the company's policy, it is known that the company maintains zero work-in-process (WIP) inventory. Departmental managers provided him their budgeted reports, but Joseph realized that there is much to interpret. To save his time Joseph decided to pull the following figures from all available reports:
Joseph's analysis shows that the company's budgeted cost of goods sold is (Do not round intermediate calculations, and round the final answer to the nearest dollar.)

A) $51,000.
B) $51,570.
C) $73,000.
D) $73,229.

Question 78

Sarah, the sales head for MGF Corporation is reviewing the half-yearly performance of her team. She notices that while the company is doing well in terms of profits and market share, there is a visible gap between the actual and budgeted results. In an attempt to further encourage her team, Sarah decides to review the selling, general, and administrative (SG&A) budget for July 2024. The values for July are as follows:
Expected Sales: 4,670 units @ $27 per unit; Expected Production: 5,500 units; Monthly Depreciation on Office Equipment: $1,200; Monthly Property Taxes and Insurance on office: $800; Sales commission: $2.30 per unit sold; Advertising expenses: $400 per month; Webhosting: $200 per month.
Based on the data given, what will the July budgeted SG&A costs be?

A) $602.30
B) $629.30
C) $13,341
D) $290,607

Question 79

Sarah owns a small jewelry booth at a local flea market, and she is in the process of creating a Cost of Goods Sold budget for the month of July of this year. She has collected information from her past records and notes that her Merchandise Inventory Balance for the end of June is $220. She will be purchasing 1,000 units from a supplier at a price of $0.42 per unit. She believes her Ending Merchandise Inventory will be $98. What is Sarah's Cost of Goods Sold budget for July?

A) $102
B) $542
C) $640
D) $4,322

Question 80

Roger is a producer of small cat toys, and he is in the process of creating a Production Budget for March of this year. He budgeted for 150 units of sales in February and expects to see a 10% increase in sales every month. Roger has created a policy where he will produce and retain 5% of next month's sales in his Finished Goods (FG) Inventory. How many Budgeted Units will Roger plan to produce for March? (Round all calculations to nearest whole unit).

A) 148
B) 157
C) 166
D) 174