Deck 9: The Master Budget

Question 1

The master budget is the set of budgeted financial statements and supporting schedules for the entire organization.

Answer 1

True

Question 2

Budgets are used for all of the following, except

A)planning for the future.
B)controlling operations.
C)recording actual results.
D)directing operations.

Answer 2

C

Question 3

Budget committees most often would include all of the following people except

A)CEO
B)Research and development manager
C)Shareholder
D)Marketing manager

Answer 3

C

Question 4

A rolling budget is a budget that is continuously updated so that the next 12 months of operations are always budgeted.

Question 5

A budget is a quantitative expression of a plan that helps managers coordinate and implement the plan.

Question 6

Budgets do not provide benchmarks to help managers evaluate performance.

Question 7

The capital expenditures budget is not part of the operating budget.

Question 8

Strategic planning involves

A)setting long-term goals that extend 5-10 years into the future.
B)setting short-term goals that extend one year into the future.
C)setting goals for next month.
D)executing directives from the board of directors.

Question 9

Which of the following is a potential disadvantage of participative budgeting?

A)Managers are more likely to be motivated by budgets they helped to create.
B)Managers may build slack into the budget.
C)Managers should have more detailed knowledge for creating realistic budgets.
D)None of the above are true.

Question 10

A rolling budget is a budget that

A)extends 5-10 years into the future.
B)is continuously updated, so that the next 12 months of operations are always budgeted.
C)begins with zero for each expense, and then amounts are added in.
D)is rolled out by upper management.

Question 11

The master budget includes both the operating budgets and the financial budgets.

Question 12

Most companies use ________ when developing the budgets each year.

A)a top-down approach
B)zero-based budgets
C)slack-based budgets
D)participative budgeting

Question 13

Managers may intentionally build slack into the budget

A)to have the resources they need in the event of budget cuts.
B)to make their performance look worse.
C)because of certainty about the future.
D)because of all of the above.

Question 14

Strategic planning involves setting short-term goals extending three to four months into the future.

Question 15

Budgets communicate financial plans throughout the company.

Question 16

Budgeting is helpful to plan for cash inflows and outflows.

Question 17

Strategic planning involves setting long-term goals that extend 5-10 years into the future.

Question 18

One of the key benefits of budgeting is that it forces managers to plan.

Question 19

Management uses budgeting to express its plans and to assess how well it's reaching its goals.

Question 20

The financial budgets project the collection and payment of cash, as well as forecast the company's budgeted balance sheet.

Question 21

Which of the following is a benefit of budgeting?

A)Focuses management's attention on the future
B)Improved decision-making processes
C)Improved motivation by employees
D)All of the above

Question 22

Which of the following is the starting place for budgeting?

A)Last year's budget
B)Last year's actual amounts
C)Zero
D)Any of the above

Question 23

"Sets the targeted revenue and expenses for the period" is best described by which of the following terms?

A)Responsibility center
B)Capital budget
C)Operating budget
D)Sensitivity analysis

Question 24

Regarding the budgeting process, which of the following statements is true?

A)The budget should always be designed by top corporate management.
B)The budget should be approved by the company's external auditors.
C)The budget should be designed from the bottom up, with input from employees at all levels.
D)All of the listed statements are true regarding the budgeting process.

Question 25

Which of the following is an advantage of zero-based budgeting?

A)It is time consuming.
B)It forces managers to justify every dollar put in the budget, so some expenses may be lower than they were in previous years.
C)It is labor intensive.
D)All of the above are advantages.

Question 26

Which of the following alternatives reflects the proper order of preparing components of the master budget? 1. Financial budget
2) Operating budget
3) Capital expenditures budget

A)1, 3, 2
B)2, 3, 1
C)1, 2, 3
D)3, 1, 2

Question 27

Which of the following is an advantage of the budgeting process?

A)Coordinates the activities of the organization
B)Assures that the lowest cost materials will be obtained
C)Assures the company will achieve its objectives
D)Guarantees that a profit will be achieved

Question 28

Which of the following budgets is the cornerstone of the master budget?

A)sales
B)cash
C)budgeted balance sheet
D)operating expense

Question 29

The ________ budget is part of the financial budgets.

A)direct labor
B)capital expenditure
C)budgeted income statement
D)manufacturing overhead

Question 30

All of the following are functions of the budget committee except

A)reviews submitted budgets.
B)determines the bonuses awarded to those who achieve budget targets.
C)approves the final budget.
D)removes unwarranted slack.

Question 31

The ________ budget is part of the financial budgets.

A)production
B)budgeted income statement
C)budgeted balance sheet
D)sales

Question 32

Which of the following alternatives reflects the proper order of preparing components of the master budget? 1. Production budget
2) Sales budget
3) Direct materials budget

A)2, 3, 1
B)1, 3, 2
C)3, 1, 2
D)2, 1, 3

Question 33

Managers may intentionally build slack into the budget

A)because of uncertainty about the future.
B)to make their performance look better.
C)to have the resources they need in the event of budget cuts.
D)because of all of the above.

Question 34

Which of the following statements about budgeting is not true?

A)Budgeting is an aid to planning and control.
B)The operating budget should be prepared by top management, rather than mid-management personnel, because they have the overall objectives of the company in mind.
C)Budgets help to coordinate the activities of the entire organization.
D)Budgets promote communication and coordination between departments.

Question 35

The budget committee

A)rarely has the final say on the budget.
B)usually is made up of the accounting staff.
C)usually is made up of managers from all areas of the value chain.
D)usually is made up of the Board of Directors.

Question 36

The ________ budget is part of the financial budgets.

A)cash
B)sales
C)direct materials
D)operating expense

Question 37

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

A)cash
B)operating
C)capital expenditures
D)financial

Question 38

List and describe three reasons why a company and its managers could benefit from the use of budgeting.

Question 39

The ________ budget is part of the operating budgets.

A)capital expenditure
B)budgeted balance sheet
C)production
D)cash

Question 40

"The comprehensive budget" is best described by which term below?

A)Operating budget
B)Sensitivity analysis
C)Responsibility center
D)Master budget

Question 41

The ________ budget starts with the number of units to be produced.

A)production
B)operating expense
C)direct materials
D)All of these choices start with the number of units to be produced.

Question 42

When creating the sales budget, management simply takes the sales from the year before and divides that total by 12 months. Thus, each month will always predict the same amount of budgeted sales.

Question 43

The ________ budget is the only budget stated ONLY in units, not dollars.

A)production
B)sales
C)direct materials
D)manufacturing overhead

Question 44

The ________ is a plan that shows the units to be sold and the projected selling price and is also the starting point in the budgeting process.

A)cash budget
B)budgeted statement of cash flows
C)budgeted income statement
D)sales budget

Question 45

The sales budget is the cornerstone of the master budget.

Question 46

Budgeting includes planning for ending inventory.

Question 47

Desired ending inventory is 25% more than beginning inventory. If purchases total $160,000, which of the following statements is true regarding cost of goods sold (COGS)?

A)COGS will exceed cost of goods available for sale.
B)COGS will be less than purchases.
C)COGS will exceed purchases.
D)COGS will equal $55,000.

Question 48

On the direct materials budget, the total quantity of direct materials needed is computed as

A)quantity needed for production + desired end inventory of DM - beginning inventory of DM.
B)units to be produced + desired end inventory of DM - beginning inventory of DM.
C)units to be produced - desired end inventory of DM + beginning inventory of DM.
D)quantity needed for production - desired end inventory of DM + beginning inventory DM.

Question 49

The first component of the operating budget is the production budget.

Question 50

Desired ending inventory is 20% of next month's sales. If cost of goods sold is $300,000 and next month's sales is $900,000, which of the following statements is true regarding purchases?

A)Purchases will be more than cost of goods sold.
B)Purchases cannot be predicted from the information given.
C)Purchases will be less than cost of goods sold.
D)Purchases will equal cost of goods sold.

Question 51

In preparing the operating budget, the first step is preparing the

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

Question 52

On the production budget, the number of units to be produced is computed as

A)unit sales + desired end inventory + beginning inventory.
B)unit sales + desired end inventory - beginning inventory.
C)unit sales - desired end inventory - beginning inventory.
D)unit sales - desired end inventory + beginning inventory.

Question 53

On the direct labor budget, the total quantity of direct labor hours needed is computed as

A)units to be produced × direct labor hour per unit.
B)quantity needed for production + indirect labor hours - direct labor hours.
C)units to be produced - indirect labor hours × cost per labor hour.
D)estimated direct labor hours needed × cost per hour.

Question 54

Which of the following is not included in the operating budget?

A)Budgeted income statement
B)Sales budget
C)Inventory budget
D)Budgeted balance sheet

Question 55

Which of the following budgets or financial statements is part of the operating budget?

A)Sales budget
B)Budgeted balance sheet
C)Capital expenditures budget
D)Cash budget

Question 56

Which of the following budgets usually shows separate sections for fixed and variable costs?

A)Direct materials and manufacturing overhead budget
B)Manufacturing overhead budget and production budget
C)Production budget and manufacturing overhead budget
D)Operating expense budget and manufacturing overhead budget

Question 57

Which of the following is not part of the operating budget?

A)Inventory, purchases and cost of goods sold budget
B)Cash budget
C)Sales budget
D)Budgeted income statement

Question 58

The ________ budget begins with the number of units to be sold.

A)manufacturing overhead
B)direct materials
C)production
D)capital expenditures

Question 59

The three components of the operating budget are the sales budget; inventory, purchases and cost of goods sold budget; and the cash budget.

Question 60

The sales budget must be prepared after every other component of the operating budget.

Question 61

Dallas Corporation had beginning inventory of 19,500 units and expects sales of 85,000 units during the year. Desired ending inventory is 18,500 units. How many units should Dallas Corporation produce?

A)84,000 units
B)47,000 units
C)86,000 units
D)123,000 units

Question 62

Mockingbird Company expects to sell 5,200 bird perches in January and 9,500 in February for $3 each. What will be the total sales revenue reflected in the sales budget for those months?

A)January $1,733; February $3,167
B)January $15,600; February $28,500
C)January $3,167; February $1,733
D)January $28,500; February $15,600

Question 63

Goddard's Department Store has budgeted cost of goods sold of $44,000 for its men's shorts in March. Management also wants to have $8,000 of men's shorts in inventory at the end of March to prepare for the summer season. Beginning inventory of men's shorts for March is expected to be $5,500. What dollar amount of men's shorts should be purchased in March?

A)$46,500
B)$41,500
C)$57,500
D)$30,500

Question 64

Sam's Toys budgeted sales of $300,000 for the month of November and cost of goods sold equal to 80% of sales. Beginning inventory for November was $50,000 and ending inventory for November is estimated at $55,000. How much are the budgeted purchases for November?

A)$245,000
B)$65,000
C)$235,000
D)$135,000

Question 65

Thomas Corporation recorded sales of $200,000 during March. Management expects sales to increase 5% in April, another 2% in May, and another 10% in June. Cost of goods sold is expected to be 80% of sales. What is the budgeted gross profit for June?

A)$47,124
B)$43,697
C)$235,620
D)$42,840

Question 66

CatNap Company has two products: Kittyz and Katz. A March sales forecast projects 20,000 units of Kittyz and 15,000 units of Katz are going to be sold at prices of $15 and $12, respectively. The desired ending inventory of Kittyz is 20% higher than the beginning inventory, which was 2,000 units. How much are total March sales for Kittyz anticipated to be?

A)$100,000
B)$180,000
C)$300,000
D)$240,000

Question 67

Piatt Company expects cash sales for July of $15,000, and a 26% monthly increase during August and September. Credit sales of $12,000 in July should be followed by 30% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?

A)$19,500 and $15,120
B)$25,350 and $19,051
C)$18,900 and $15,600
D)$23,814 and $20,280

Question 68

Hewitt Company expects cash sales for July of $15,000, and a 22% monthly increase during August and September. Credit sales of $10,000 in July should be followed by 30% increases during August and September. What are budgeted cash sales and budgeted credit sales for September respectively?

A)$19,500 and $12,200
B)$25,350 and $14,884
C)$22,326 and $16,900
D)$18,300 and $13,000

Question 69

Fosnight Enterprises prepared the following sales budget: The expected gross profit rate is 30% and the inventory at the end of February was $10,000. Desired inventory levels at the end of the month are 20% of the next month's cost of goods sold.
What is the desired beginning inventory on June 1?

A)$840
B)$1,680
C)$1,960
D)$9,800

Question 70

Russell Company expects cash sales for July of $15,000, and a 22% monthly increase during August and September. Credit sales of $6,000 in July should be followed by 15% decreases during August and September. What are budgeted cash sales and budgeted credit sales for September?

A)$18,300 and $5,100
B)$22,326 and $4,335
C)$12,750 and $7,320
D)$10,838 and $8,930

Question 71

Rubino Corporation desires a December 31 ending inventory of 900 units. Budgeted sales for December are 2,650 units. The November 30 inventory was 850 units. What are budgeted purchases in units?

A)3,550
B)2,600
C)2,700
D)4,400

Question 72

DogDayz Company has two products: Doggyz and Pupz. A March sales forecast projects 22,000 units of Doggyz and 15,000 units of Pupz are going to be sold at prices of $17.50 and $12.00, respectively. The desired ending inventory of Doggyz is 20% higher than the beginning inventory, which was 2,000 units. How much are total March sales for Doggyz anticipated to be?

A)$180,000
B)$385,000
C)$264,000
D)$110,000

Question 73

SportSupplies Corporation has budgeted purchases of inventory for December of $140,000. Expected beginning inventory on December 1 and ending inventory on December 31 are $90,000 and $120,000, respectively. If cost of goods sold averages 88% of sales, what are budgeted sales for December?

A)$125,000
B)$96,800
C)$193,182
D)$397,727

Question 74

Meers Corporation had beginning inventory of 21,000 units and expects sales of 76,500 units during the year. Desired ending inventory is 19,500 units. How many units should Meers Corporation produce?

A)78,000 units
B)36,000 units
C)75,000 units
D)117,000 units

Question 75

Kotrick Company has beginning inventory of 15,000 units and expected sales of 23,000 units. If the desired ending inventory is 18,000 units, how many units should be produced?

A)20,000
B)56,500
C)10,000
D)26,000

Question 76

Bruner Stores wants to have 500 shovels in ending inventory on December 31. Budgeted sales for December are 1,950 shovels. The November 30 inventory was 320 shovels. How many shovels should Benson Stores purchase for December?

A)2,770
B)1,770
C)2,450
D)2,130

Question 77

McCoy Company wants to have an ending inventory of 7,000 units. McCoy Company has beginning inventory of 9,000 units and expects to sell 33,000 units. How many units should McCoy Company produce?

A)31,000
B)35,000
C)49,000
D)40,000

Question 78

Loyal Pet Company expects to sell 5,000 beefy dog treats in January and 9,000 in February for $3 each. What will be the total sales revenue reflected in the sales budget for those months?

A)January $15,000; February $27,000
B)January $1,667; February $3,000
C)January $3,000; February $1,667
D)January $27,000; February $15,000

Question 79

Crafty Carpentry Company produces and sells a shelf for $25 each. The beginning inventory is 2,000 shelves, and the desired ending inventory is 2,200 shelves. If budgeted production is 12,500 shelves, what is the forecasted sales revenue from the shelves?

A)$417,500
B)$307,500
C)$317,500
D)$207,500

Question 80

Willard's Department Store has budgeted cost of goods sold of $42,000 for its men's shorts in March. Management also wants to have $7,600 of men's shorts in inventory at the end of March to prepare for the summer season. Beginning inventory of men's shorts for March is expected to be $5,500. What dollar amount of men's shorts should be purchased in March?

A)$39,900
B)$44,100
C)$55,100
D)$29,900