Deck 9: The Master Budget

Question 1

A rolling budget is useful because the organization can continue to budget its operations 12 months into the future.

Answer 1

True

Question 2

Strategic planning enables the organization to establish long-term goals that extend 5-10 years into the future.

Answer 2

True

Question 3

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

Answer 3

True

Question 4

Most companies use ________ when the managers develop budgets each year.

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

Question 5

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

Question 6

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

Question 7

Management uses budgets to express its plans and to assess how well the organization meets or exceeds its goals.

Question 8

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

Question 9

Budget committees include all of the following people except

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

Question 10

Budgets are helpful because managers can plan the cash inflows and outflows in an organization.

Question 11

Budgets do not provide benchmarks to help managers evaluate performance.

Question 12

The capital expenditures budget is not a component of the operating budget.

Question 13

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

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

Question 14

The financial budget projects the collection and payment,of cash,and the forecast of the company's budgeted balance sheet.

Question 15

Budgets communicate financial plans to employees at all levels in the company.

Question 16

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

Question 17

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 executed by upper management.

Question 18

Managers may intentionally build slack into the budget

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

Question 19

Budgets are used to accomplish all of the following tasks,except

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

Question 20

Strategic planning is beneficial because the organization can

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

Question 21

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 22

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

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

Question 23

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

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

Question 24

All of the following are functions of the budget committee except

A)review the budgets it submits for approval in an organization.
B)determine the bonuses the organization awards to employees that achieve the target budget.
C)approve the final budget it expects the organization to implement.
D)remove unwarranted slack in the workplace.

Question 25

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

A)Zero-based budgeting is time consuming.
B)Zero-based budgeting forces managers to justify each dollar in the budget to ensure that some expenses are lower in a current year compared to what they were in previous years.
C)Zero-based budgeting is labor intensive.
D)All of the above are advantages.

Question 26

"The comprehensive budget" is best described by which of the following terms?

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

Question 27

Which of the following terms is useful because it compares "actual" revenues and expenses against "budgeted" revenues and expenses?

A)Responsibility center
B)Capital budget
C)Performance report
D)Sensitivity analysis

Question 28

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 in an organization.

Question 29

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

A)Top corporate management should always design the budget.
B)The company's external auditors should always approve the budget.
C)The budget should be designed from the bottom up,with input from managers at all levels.
D)All of the listed statements are true statements about the budgeting process.

Question 30

Which of the following alternatives reflect 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 31

Which of the following is a benefit to an organization that implements a budget?

A)Budgets help managers focus their attention on the future needs in an organization.
B)Budgets help managers improve their decision-making processes in an organization.
C)Budgets help the manager improve the motivation of employees in the workplace.
D)All of the above

Question 32

The ________ budget is a component in a financial budget.

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

Question 33

The ________ budget is a component in a financial budget.

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

Question 34

Which of the following should the organization use to initiate a budget?

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

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

Managers may intentionally build slack into the budget

A)because they are uncertain about the future.
B)to make their performance appear better.
C)to acquire the resources they need in the event the organization implements a budget cut.
D)because all of the above are true.

Question 37

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

Question 38

The ________ budget is a component in a financial budget.

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

Question 39

The ________ budget is a component in an operating budget.

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

Question 40

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 41

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 42

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 expenses budget and manufacturing overhead budget

Question 43

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 44

Desired ending inventory is 20% of next month's sales.If cost of goods sold is $300,000 and next month's sales are $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 45

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 46

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

Question 47

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 48

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 49

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 50

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

Question 51

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

Question 52

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

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

Question 53

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 54

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 55

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 56

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

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

Question 57

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 58

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

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

Question 59

Budgeting includes planning for ending inventory.

Question 60

The sales budget is the cornerstone of the master budget.

Question 61

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 62

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 63

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 64

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 65

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 66

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 67

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

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

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 70

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 71

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 72

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 73

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 74

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 75

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 76

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 77

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 78

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 79

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 80

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